Highfields Capital Management, LP, founded in 1998 and based in Boston, Massachusetts, is a privately owned value-oriented investment management firm. It was founded by Jonathon Jacobson and Richard Grubman. It provides its services to endowments, charitable and philanthropic foundations, pension funds, and other institutional and private investors. Highfields’ investment funds have over $13 billion in net capital invested worldwide in public and private companies across a wide variety of industries and security types. Its mission is to provide its limited partners superior long-term risk-adjusted returns in order to further many of their own good works in areas like education, medical research, the arts, and philanthropy.
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
Highfields Capital Management started positions in Ashland Inc. (ASH), News Corp. (NWSA), Micron Technology Inc. (MU), and CF Industries Holdings (CF) and it sold Illumina Inc. (ILMN) and Oracle Corp. (ORCL).
Why buy Micron Technology Inc. (MU)?
Micron Technology reported net income of $1.71 billion on net sales of $2.8 billion in 4Q 2013 compared to a net loss of $243 million on net sales of $2.0 billion in 4Q 2012. The revenues from sales of DRAM products in 4Q 2013 were 50% higher compared to 3Q 2013. This was due to a 42% increase in sales volume and a 5% increase in average selling prices. The company completed the acquisition of Elpida Memory, Inc., and Rexchip Electronics Corporation in the quarter. The results included accounting gains and operations of Elpida for August. Revenues from sales of NAND Flash products were 5% higher in 4Q 2013 compared to 3Q 2013—primarily due to a 17% increase in sales volume offset by an 11% decrease in average selling prices. The company’s Solid State Drive (or SSD) business is growing significantly faster than the overall SSD market. Micron-branded SSD revenue for the year was 76% over 2012.
Micron CEO Mark Durcan said the company is positioned well to compete in the current favorable market environment with the successful integration of Elpida and ongoing steady development of advanced memory solutions—including its hybrid memory cube, which began sampling with key customers this quarter. Moreover, its second-generation family of PCIe enterprise SSDs recently qualified at a major OEM. Analysts are expecting a pullback in the stock, considering it’s up over 228% year-to-date.
Highfields founder Jonathon Jacobson is an undergraduate alumnus of the Wharton School in finance. He has an MBA from Harvard Business School. After working as an options trader and at Merrill Lynch and Lehman Brothers, he started a successful stint at Harvard Management Company in 1990. In 1998, Jacobson left HMC to co-found Highfields, with a third of the fund’s initial $1.5 billion under management coming from HMC. Grubman retired in August 2010.
According to Jacobson, it’s very difficult to find a good company trading at a cheap price despite having a hedge fund research team. So he claims that Highfields does end up evaluating unattractive businesses with low valuations whose poor performance the Street expects to continue. Companies whose price is low, and that are overcoming issues, might be considered a buy.