Friday's Large-Cap Tech Winner: Juniper Networks

After Elliott Management, activist fund Jana Partners piles into Juniper Networks.

Jan 24, 2014 at 10:15AM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

A sell-off in emerging markets appears to be setting the tone for developed markets on Friday, as U.S. stocks opened lower, with the S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) down 0.69% and down 0.61%, respectively, at 10:15 a.m. EST.

One predator that has found a prey will often attract another.

Juniper Networks (NYSE:JNPR) was the third-best performing stock in the S&P 500 last week and it looks likely to be one of the best performers again today, if this morning's price action holds -- the stock is up nearly 10% at 10:15 a.m. EST. Last week's performance followed the announcement by activist hedge fund Elliott Management that it owned 6.2% of the tech company's stock. The hedge fund also released a presentation detailing its "value plan" for Juniper, which it believes could raise the stock price to $35-$40 by cutting operating costs by $200 million and initiating a $3.5 billion capital return program.

Today's pop in the stock price is the result of news that another activist fund, Jana Partners, has sent a letter to its investors stating that it is now one of Juniper's largest shareholders and calling for similar actions to those outlined in Elliot's presentation. Jana thinks the company ought to cut $300 million in costs and implement a capital return program.

The activists are not going unheard. During Juniper's quarterly earnings call yesterday, CEO Shaygan Kheradpir, who only just took the reins of the company on Jan. 1, referred to himself as an "agent of change" and said that he would review its cost structure and consider share repurchases and dividends.

Juniper disclosed on Thursday that it has more than $4 billion in cash and equivalents; Elliott Management's presentation observed that, at nearly one-third, "Juniper's net cash balance as a % of market cap[italization] is among the highest in large-cap tech." Indeed, on that measure, Juniper outranked the cash-heavy triumvirate of Microsoft (25%), Cisco Systems (26%) and Apple (NASDAQ:AAPL) (27%). Need I mention that two among this trio, Microsoft and Apple, are themselves the objects of activist investors' efforts?

Indeed, Carl Icahn this week lamented on Twitter what he called the Apple board's "grave disservice to shareholders" in not having "markedly increased its buyback." However, with Apple having embarked on a multiyear, $100 billion capital return program, Icahn's cries ring hollow and his stake of less than 1% affords him limited influence. Juniper Networks, on the other hand, will be hard pressed to shake off Elliot Management and Jana Partners; expect some of its cash pile to begin flowing back to shareholders.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on Twitter @longrunreturns. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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