ValueAct Capital Portfolio Q3’2006: Top Holdings & Recent Changes
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ValueAct Capital has delivered a dramatic portfolio overhaul in Q3’2006, executing a 100% turnover and building a fresh slate of 26 positions. The $3.75 million portfolio is now anchored by bold new bets, with the top 10 holdings comprising over 76% of assets—a clear signal of high conviction and strategic focus. This quarter’s moves reveal a willingness to pivot decisively, with major buys across technology, data, and healthcare, setting the stage for a new chapter in ValueAct’s activist investing playbook.
Portfolio Overview: A Complete Reset and Focused Conviction
Portfolio Highlights (Q3’2006): - Market Value: $3,747.5K - Top 10 Holdings: 76.2% - Portfolio Size: 26 +26 - Average Holding Period: 1 quarter - Turnover: 100.0%
This quarter marks a radical transformation for ValueAct Capital’s portfolio, with every position newly initiated and no legacy holdings carried forward. The portfolio’s concentration—over three-quarters in the top 10 names—reflects a strategy built on conviction rather than diversification for its own sake. Such a high turnover rate 100% is rare among superinvestors and signals a deliberate repositioning, possibly in response to shifting market dynamics or new strategic priorities.
The average holding period of just one quarter underscores the tactical nature of these moves. While ValueAct is known for its activist approach, this quarter’s activity suggests a willingness to rapidly redeploy capital into areas where management sees the greatest potential for value creation. The portfolio’s composition, with 26 distinct positions, balances focus with enough breadth to capture opportunities across several sectors.
Top Holdings Analysis: Data, Tech, and Healthcare Dominate the New Slate
The portfolio’s backbone is a series of aggressive buys, with every top position reflecting fresh conviction. Gartner, Inc. stands out at 9.7% of assets, a major new stake in the technology research and advisory space. The largest allocation goes to REUTERS GROUP PLC ORD 25P 11.6%, signaling a strong bet on global information services, though this holding is not currently tracked on ValueSense’s ticker pages.
Other significant additions include AVAYA INC 9.5%, a communications technology provider, and REYNOLDS & REYNOLDS CO CL A 8.4%, a leader in automotive software and services. MDS INC 7.6% and VALEANT PHARMACEUTICALS INTL 6.2% bring healthcare exposure, while ACXIOM CORP 6.8% and SEITEL INC NEW 6.2% add data management and energy sector diversification. CATALINA MARKETING CORP 5.3% and HANOVER COMPRESSOR CO 4.9% round out the top new buys, reflecting a blend of marketing analytics and industrial services.
All top positions were initiated this quarter, with “Buy” actions across the board—no reductions or sales. This signals a portfolio built from the ground up, with each holding selected for its perceived undervaluation and strategic potential. The absence of legacy positions means every allocation reflects ValueAct’s current outlook, unencumbered by past commitments.
What the Portfolio Reveals About Current Strategy
- High Conviction, Low Legacy: The 100% turnover and “Buy” actions indicate a willingness to reset and pursue new opportunities aggressively.
- Sector Diversification: Technology, healthcare, data analytics, and industrials are all represented, suggesting a multi-sector approach to value creation.
- Activist DNA: The focus on companies with operational leverage and transformation potential aligns with ValueAct’s reputation for engaging with management and driving change.
- Concentration as a Statement: With 76.2% in the top 10 holdings, the portfolio is designed to amplify the impact of its best ideas, rather than dilute returns across many small bets.
- Short Holding Period: The one-quarter average holding period may reflect tactical positioning or a willingness to quickly adapt to new information.
Portfolio Concentration Analysis
| Position | Value | % of Portfolio | Recent Change |
|---|---|---|---|
| REUTERS GROUP PLC ORD 25P | $433.5K | 11.6% | Buy |
| Gartner, Inc. | $362.9K | 9.7% | Buy |
| AVAYA INC | $356.5K | 9.5% | Buy |
| REYNOLDS & REYNOLDS CO CL A | $313.8K | 8.4% | Buy |
| MDS INC | $284.0K | 7.6% | Buy |
| ACXIOM CORP | $254.6K | 6.8% | Buy |
| VALEANT PHARMACEUTICALS INTL | $233.9K | 6.2% | Buy |
| SEITEL INC NEW | $232.3K | 6.2% | Buy |
| CATALINA MARKETING CORP | $199.3K | 5.3% | Buy |
| HANOVER COMPRESSOR CO | $185.1K | 4.9% | Buy |
The table highlights the portfolio’s ultra-concentrated nature, with each top holding representing a significant allocation and all actions marked as “Buy.” This approach magnifies the impact of each investment decision, making the portfolio’s performance highly sensitive to the success of its largest bets. The absence of “Reduce” or “Sell” actions further underscores the fresh conviction behind each position.
Investment Lessons from ValueAct Capital’s Activist Playbook
- Conviction Drives Returns: Concentrating capital in high-conviction ideas can lead to outsized gains when the analysis is correct.
- Be Willing to Reset: Sometimes the best move is a complete portfolio overhaul, especially when market conditions or strategic priorities change.
- Sector Breadth with Focus: Diversifying across sectors while maintaining concentration in top ideas balances risk and opportunity.
- Active Engagement: ValueAct’s history shows that engaging with management and driving operational improvements can unlock hidden value.
- Adaptability Matters: High turnover and short holding periods reflect a willingness to pivot quickly—an essential trait in volatile markets.
Looking Ahead: What Comes Next?
With a fully rebuilt portfolio and significant allocations to technology, healthcare, and data analytics, ValueAct Capital is positioned to capitalize on transformational trends in these sectors. The high cash deployment and absence of legacy positions suggest readiness to respond to new opportunities as they arise. Investors should watch for potential activist campaigns, operational improvements, and further tactical shifts in upcoming quarters. The current positioning sets the stage for rapid evolution, with the potential for both outsized gains and increased volatility.
FAQ about ValueAct Capital Portfolio
Q: Why did ValueAct Capital execute a 100% turnover this quarter?
ValueAct Capital rebuilt its portfolio from scratch, likely in response to changing market conditions or a strategic shift. Every position was newly initiated, reflecting fresh conviction and a willingness to pursue new opportunities.
Q: How concentrated is ValueAct Capital’s portfolio?
The top 10 holdings comprise 76.2% of total assets, demonstrating a highly concentrated approach focused on amplifying the impact of its best ideas.
Q: What sectors does ValueAct Capital favor?
This quarter’s portfolio includes technology, healthcare, data analytics, and industrials, reflecting a multi-sector strategy with an emphasis on companies capable of transformation.
Q: How can investors track ValueAct Capital’s moves?
Follow ValueAct Capital’s quarterly 13F filings and use ValueSense’s portfolio tracker for real-time updates, in-depth analysis, and historical trends. Note that 13F filings have a 45-day reporting lag.
Q: What does a short average holding period mean for ValueAct’s strategy?
A one-quarter average holding period suggests tactical positioning and a willingness to adapt quickly, rather than a strict buy-and-hold approach.
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