In the world of activist investing, few names resonate as powerfully as Jeffrey Smith's Starboard Value. Over the past decade, the hedge fund has become synonymous with boardroom shakeups, strategic overhauls, and, occasionally, dramatic corporate turnarounds.

Founded initially in 2002 as part of Ramius Capital before going independent in 2011, Starboard Value quickly made a name for itself by targeting undervalued and underperforming companies, advocating for changes that ranged from operational tweaks to full-blown mergers. 

So, what’s the story behind this influential fund and who is the man at its helm?

Wharton School graduate Jeffrey Smith cut his teeth in the finance world at Ramius Capital before co-founding Starboard. His approach to investing was clear from the outset: meticulous research, a keen eye for operational inefficiencies, and a strong belief in shareholder value. Smith's philosophy was simple: if a company wasn't living up to its potential, it was time for change.

One of Starboard's earliest and most notable successes was its 2014 challenge to Darden Restaurants (US:DRI), the parent company of Olive Garden. Smith and his team criticized everything from the company's financial strategy to the number of breadsticks it served. The campaign culminated in a complete overhaul of Darden's board, with Starboard successfully placing all of its 12 nominees.

Starts With Deep Understanding

But it's not just about breadsticks and board seats. Smith's approach has always been grounded in a deep understanding of the companies he targets. He often spends months, if not years, analyzing a company before making a move, ensuring that when Starboard speaks, it does so with authority. Over the years, Starboard has taken on giants like Yahoo!, Depomed, and Perrigo (US:PRGO), often with significant success. 

While not every campaign results in a victory, Smith's track record is impressive, with many of the companies he targets seeing substantial stock price appreciation post-engagement.

The Fintel platform provides deep analysis on Jeffrey Smith’s hedge fund with performance metrics and the latest trade movements.

During the recent June quarter, the number of holdings managed by the fund was cut by 54%, with the fund shrinking to a mere 48 conviction calls from what had previously been 104 positions. That culling started after June 2022 when the fund held 183 investments.

Starboard also reported a 6.7%  decline in its reported value, ending the quarter with $4.63 billion in funds under management. The chart below illustrates the fund's value trajectory over the last 10 years.

The fund's top industries for investing include; Paper and Allied Products, Transportation Equipment and General Merchandise Stores.

The fund's top five positions by portfolio weight are: GoDaddy (US:GDDY) at a whopping 16.3%, Splunk (US:SPLK) at 9.3%, Salesforce (US:CRM) closely behind at 9.2%, Humana (US:HUM) at an 8.6% weight and Vertiv Holdings (US:VRT) at 8.5%, with the remaining holdings depicted on the Fintel heat map below.

Starboard’s Top Q2 Portfolio Increases

Algonquin Power & Utilities Corp (US:AQN) made a debut in Starboard Value's portfolio this quarter. By the quarter's end, AQN stood at a position valued $283 million, representing a significant 6.1% of the portfolio. This allocation marks solid conviction in the newly initiated and bullish position in the diversified utility company.

Starboard’s position in Vertiv Holdings (US:VRT) continued its upward momentum within Starboard's portfolio. The quarter concluded with VRT valued at a commendable $395 million. It represented 8.53% of the portfolio, with an impressive allocation growth of 3.68% driven by strong share price growth during the quarter. The fund trimmed 5% of its position in VRT as it continued to grow.

Wix.com (US:WIX), the renowned Israeli headquartered website-building platform, holds a considerable space in Starboard's allocations, ending the quarter at a value of $296 million. It claimed a 6.40% portfolio weight, showcasing an allocation boost of 2.43% during the period as the hedge fund almost doubled its number of shares held.

Abcam (US:ABCZF) signaled a fresh addition to Starboard Value's investment strategy. Closing the quarter with a position value of $112.4 million, it accounted for 2.43% of the total portfolio, marking its inception in the fund.

The position in cybersecurity firm NortonLifeLock (US:NLOK) was reinforced to a position valued at $350.6 million. This made up 7.58% of the fund’s allocations, a 1.04% increase over the quarter, with the gains all driven by share price momentum.

Health insurance giant Humana (US:HUM) ended the quarter valued at $395.7 million, at 8.55% of the portfolio as the fund increased its holdings by 85,000 shares.

The GoDaddy (US:GDDY) position in the fund had a hefty value of $754.34 million, and was the biggest position, at 16.30% of the portfolio.

The position in big data platform Splunk (US:SPLK), a big data platform, rose to $431.6 million, representing 9.33% of the fund's allocation even while the fund manager reduced its total shares held by around ~500,000.

Lastly, RB Global (US:RBA) wrapped up the quarter with a position value of $15 million worth 0.33% of Starboard's portfolio.

Overall, this quarter’s shifts within Starboard Value's portfolio emphasize the manager’s confidence in tech platforms and utility giants while ensuring a diversified approach with the inclusion of health insurance and cybersecurity sectors.

Starboard’s Top Q2 Portfolio Decreases

Starboard’s sales during the second quarter show a decrease in Willis Towers Watson (US:WTW) shares to a value of $119.98 million, representing 2.59% of the portfolio. That was a decrease of 5.93%.

AECOM (US:ACM) ended the quarter with its allocation valued at $320.2 million, at 6.92% of the portfolio, marking a decrease of 2.23% in its allocation.

The position in Mercury Systems (US:MRCY) was halved to 2.2% of the holdings, valued at quarter’s end at $98.1 million.

Commvault Systems (US:CVLT) ended the quarter valued at $8.9 million, accounting for 0.19% of the portfolio after seeing a 1.62% decrease in its allocation.

Salesforce (US:CRM) maintained a prominent position, though with a slight reduction valued at an impressive $424.2 million, making up 9.2% of the portfolio, with an allocation decrease of 1.02% after the fund sold 20% of its shares in the CRM provider.

Rogers (US:ROG) concluded the quarter with its position valued at $125.3 million or 2.71% of the portfolio, decreasing 0.68% from the fund's earlier allocation.

Papa John's International (US:PZZA) wrapped up the quarter with its allocation standing at $13.4 million or 0.29% of the portfolio, representing a decrease of 0.59% in allocation during the quarter.

The fund also fully exited its position in Enovis Corp (US:ENOV), leading to a drop of 0.38% in its portfolio allocation.