The remarkable interest from activist-investors in Salesforce (CRM) has continued to decline in the second quarter, according to the latest regulatory filings from influential Wall Street professionals. These prominent investors have also made moves in nine other Club stocks during a strong three-month period that marked the best first half of the market in years. In relation to Salesforce, Third Point, led by Dan Loeb, sold its stake in the second quarter. Starboard Value, led by Jeff Smith, who was the first known activist to target the enterprise software giant, reduced its stake by 21% in the three months ending June 30. These sales are among the Club-related trades disclosed in this week’s batch of 13Fs filings. These disclosures, submitted quarterly to US regulators, provide some insight into the investment decisions made by Wall Street professionals.
Third Point is the second of the five activist investors that have recently pressured Salesforce to exit their positions in the company. In the first quarter, Inclusive Capital, led by Jeffrey Ubben, sold all 1.63 million shares it owned at the end of 2022. This activist retreat occurred after Salesforce demonstrated improved profitability and cost discipline this year, along with changes to its board of directors. The company’s stock price recovered in the first half of the year and reached a 52-week high in mid-July. Since then, Salesforce’s stock has declined slightly. Jeff Smith of Starboard stated in an interview with CNBC last month that the changes made by Salesforce were significant. However, his firm still owns approximately 2 million shares of the company as of June 30. Despite the second-quarter sales, Smith remains optimistic about Salesforce, believing there is room for further improvement in operating margins and revenue growth. He argued that the stock is still undervalued in the same interview. Salesforce’s shares have dropped about 7% since Smith’s remarks, but are still up 57.5% year-to-date.
It’s important to keep in mind that 13Fs have some limitations. They do not list short positions, preventing a complete understanding of a firm’s stance. Additionally, 13Fs provide backward-looking information and may not accurately represent a firm’s current holdings. They only include the number of shares owned at the end of the period and their value at that time. Therefore, it is not possible to determine gains or losses solely from the filing. Despite these limitations, analyzing 13Fs is often referred to as “whale watching.” ValueAct, for example, maintained its stake of approximately 3.5 million shares in Salesforce during the second quarter. Mason Morfit, CEO and Chief Investment Officer of ValueAct, now serves on Salesforce’s board. The positioning of Paul Singer’s Elliott Management, the fifth known activist investor in Salesforce, remains uncertain. Elliott’s latest quarterly disclosure did not list any Salesforce stock, similar to its first-quarter filing. It is possible that Elliott used a type of derivative not included in 13F filings to build a multi-billion-dollar interest in Salesforce.
Elliott’s 13F did shed light on the size of its stake in Club holding Constellation Brands. As of June 30, Elliott owned 441,000 shares worth about $108.5 million. In July, Constellation announced an information sharing and cooperation agreement with Elliott, which benefits fellow shareholders. The agreement allows representatives from Elliott to attend Constellation board meetings and have access to nonpublic information about the company, but it restricts Elliott’s ability to trade Constellation shares.
In other news, Trian Fund Management, led by Nelson Peltz, increased its position in Walt Disney Co. by 8.6% in the second quarter to approximately 6.43 million shares. This is a reversal from the first quarter, during which Trian reduced its stake by 34%. Peltz ended his proxy fight with Disney in February after CEO Bob Iger implemented a restructuring and cost-saving effort. However, Disney’s shares have underperformed the market since then, declining by 21% from February 9 to the recent close on Tuesday. In contrast, the S&P 500 has gained over 8% during the same period.
Hedge fund manager David Tepper significantly increased his stake in Nvidia during the second quarter, owning 1.02 million shares worth about $41.67 million as of June 30. This is a substantial increase from the 150,000 shares reported at the end of the first quarter. Tepper also more than doubled his position in Meta Platforms, with 1.5 million shares owned as of June 30. His holdings in Microsoft quadrupled, and he purchased 2.3 million shares of Advanced Micro Devices and 480,000 shares of Apple during the second quarter. It’s worth noting that Tepper is known for being a nimble trader, so his holdings at the end of the second quarter may differ significantly from mid-August.
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