Jeffrey Smith, CEO and CIO of activist hedge fund firm
Starboard Value, highlighted pharmaceutical company Perrigo and
internet holding company Altaba as his top stock picks during
Delivering Alpha conference, saying the former is undervalued
and the latter presents a promising way to play potential
corporate tax reform.
Smith spent most of his talk discussing Perrigo, in which Starboard disclosed taking a 4.6 percent
stake last September, now 6.7 percent. Shares for the stock,
which Smith called his best investment idea, jumped by more
than 5 percent at mid-day on Tuesday.
The company has three business lines: a consumer segment
making store-brand versions of over-the-counter medications, an
international segment of that same business, and a generic
pharmaceutical business. Smith said the U.S. store-brand business
has consistent and defensible growth,
particularly in e-commerce, pointing out that in a search
for Tylenol on Amazon.com, five of the top six search results
are products made by Perrigo.
He added that the company is conducting a strategic
review of the generics business, which could entail a
sale, partnership, or spinoff, among other options, and is also
conducting a CEO search.
Smith also said that the companys international
consumer segment is making progress in improving its
We believe these initiatives will close the valuation
gap between Perrigo and its peers while also creating
value, he said.
Smith also touted Altaba, the company formerly known as
Yahoo!, calling it one of the most interesting ways to
have an uncorrelated opportunity to invest in corporate tax
reform. Between its Yahoo! Japan and Alibaba businesses,
the company has $82 billion in value but trades at a nearly 34
percent discount to pretax value. Smith asserted that if tax
reform actually happens, that discount has to go
When asked about his firms decision to dump its stake
in Macys an investment Smith announced to much
fanfare at the Delivering Alpha conference in July 2015
Smith asserted that while he thinks the company still has value
even beyond its real-estate holdings, trying to fix
Macys in the public markets is too difficult.