Get Premium to unlock powerful stock data

Jana Partners Further Pares Down Top Holding Perspecta

Activist firm reduces stake in IT company that is being acquired

Author's Avatar
Sydnee Gatewood
Mar 16, 2021
Article's Main Image

Investment firm

Jana Partners (Trades, Portfolio) disclosed earlier this week it trimmed its stake in Perspecta Inc. (PRSP, Financial) by 18.74%.

Taking a value-oriented, event-driven approach to picking stocks, the New York-based firm founded in 2001 by Barry Rosenstein often enters activist positions in order to help unlock value for shareholders.

Having previously reduced the position by 29.66% in January, GuruFocus Real-Time Picks, a Premium feature, showed the activist firm divested of another 2.01 million shares of the Chantilly, Virginia-based company on March 2, impacting the equity portfolio by -3.96%. The stock traded for an average price of $29 per share on the day of the transaction.

Jana now holds 8.7 million shares total, which represent 24.92% of the equity portfolio and is its second-largest holding as of the end of the fourth quarter. GuruFocus estimates the firm has gained 26.42% on the investment since establishing it in the first quarter of 2020.

ca43579ad523dd6626693ee2c95aa451.png

The IT service management company, which was created in 2018 when DXC Technology Co. (

DXC, Financial) completed a spinoff and merger transaction, has a $4.69 billion market cap; its shares were trading around $29.10 on Tuesday with a price-book ratio of 3.33 and a price-sales ratio of 1.05.

The price chart shows the stock is trading above both the median price-sales value and the median price-book ratio, suggesting it is overpriced.

fff818a1851cf1a1156c7d77452b148f.png

On Jan. 27, Perspecta announced it will be acquired by Veritas Capital's Peraton for $7.1 billion. Shareholders will receive $29.35 per share in cash.

Following the closure of the deal, which is expected to occur during the first half of calendar 2021, Perspecta will be combined with Peraton to create a leading government technology provider that delivers end-to-end capabilities in information technology and mission support.

In a statement, Perspecta Chairman and CEO Mac Curtis commented on the "beginning of an exciting new chapter."

"This announcement is the culmination of a comprehensive review process," he said. "Having considered all opportunities available, the Perspecta Board of Directors is confident this transaction offers the most compelling value creation for shareholders. Together with Peraton and with the flexibility Perspecta will have as a private company supported by Veritas, Perspecta will be well positioned to build on our momentum and continue executing on customer commitments as Perspecta delivers cyber, digital-transformation and mission-focused solutions."

The company reported its fiscal third-quarter 2021 financial results on Feb. 5. Perspecta posted adjusted earnings of 56 cents per share on $1.13 billion in revenue.

528f1d25f3f156553ea3a6a51677487c.png

GuruFocus rated Perspecta's financial strength 4 out of 10 on the back of a low cash-debt ratio and weak interest coverage. The distressed Altman Z-Score of 0.94 also warns the company could be in danger of going bankrupt. The return on invested capital also is eclipsed by the weighted average cost of capital, indicating value is being destroyed as the company grows.

71858717be7aa129dbfe5a46266b0ea7.png

The company's profitability did not fare as well, scoring a 3 out of 10 rating. While the operating margin outperforms over half of its competitors, Perspecta's returns are negative and underperform a majority of industry peers. It also has a moderate Piotroski F-Score of 4, which implies business conditions are stable.

Jana is by far Perspecta's largest guru shareholder with a 5.42% stake.

Lee Ainslie (Trades, Portfolio), Steven Cohen (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies and Chuck Royce (Trades, Portfolio) also own the stock.

Portfolio composition

As of the three months ended Dec. 31, Jana had 32.5% of its $1.48 billion equity portfolio, which consisted of 11 stocks, invested in the consumer defensive sector. Technology had the second-largest representation at 26.49%, followed by the health care space at 25.7%.

d16ff7f925dd3c53167e2e7ff45f7e18.png

The firm's top five holdings as of the end of the fourth quarter were Conagra Brands Inc. (

CAG, Financial), Perspecta, Encompass Health Corp. (EHC, Financial), Laboratory Corp. of America Holdings (LH, Financial) and the SPDR S&P 500 Trust Exchange-Traded Fund (SPY, Financial).

Disclosure: No positions.

Read more here:

Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

Also check out:
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
Rating:
0 / 5 (0 votes)

Please Login to leave a comment