Here's What Hedge Funds Pitched at 13D Monitor Conference

(Bloomberg) -- Kar Auction Services, Instructure and Rent-A-Center were among the stocks that were pitched at the 13D Monitor Conference in New York on Tuesday. Here’s a rundown:

Starboard Value

CEO Jeffrey Smith announced a new position in Kar Auction Services, calling the company a “tremendous opportunity” that had an “incredibly compelling” valuation. Smith said Kar Auction is moving ahead with a spin-off of its salvage business, which he expects will serve a near-term catalyst for the stock, and that he saw value both in the spinoff and the former parent. He called Kar a “great business with secular tailwinds.”

The size of the stake wasn’t disclosed, but Kar shares ended the day up 2.4 percent.

Separately, Smith said that Cerner Corp. shares were “still cheap” despite a recent rally that’s taken shares of the health-care data company up more than 10 percent, an advance that came after the company reached a deal with Starboard over board seats. Smith said that the company’s margin targets were reasonable and achievable, and that it had the opportunity to improve its governance and leadership. According to Bloomberg data, Starboard owns more than 3 million shares of Cerner, or about 1 percent.

Shares closed down about 0.7 percent.

Corvex Management

Keith Meister called Diamondback Energy, Concho Resources and Pioneer Natural Resources “must-own” takeover targets, saying he “would be shocked” if they were still independent companies in three to five years. He cited their exposure to the Permian Basin, and said that the Chevron-Anadarko deal could act as a catalyst for the broader energy sector. Corvex owns more than 3.5 million shares of Diamondback, and Meister said it had better growth and margins than its peers, estimating about $6 billion in Ebitda by 2021.

Diamondback shares rose 0.9 percent on Tuesday while Concho closed up 0.4 percent and Pioneer gained 2.1 percent.

Praesidium Investment Management

Co-founder Kevin Oram said that Instructure could be worth twice its current valuation if it were to separate its Bridge and Canvas businesses. Such a move would unlock value, he said, adding that Bridge would be attractive to strategics. Oram said that the Canvas business alone could be worth between $2.5 billion and $3 billion, compared with Instructure’s current market capitalization of around $1.8 billion. The firm has a 5% stake in Instructure, according to a 13D filed on Monday.

Shares of Instructure gained 4.1 percent on Tuesday, closing at their highest since July.

Engaged Capital

Founder Glenn Welling said that Rent-A-Center could return between 30 percent and 90 percent by the end of 2019, arguing that the current stock price "does not even come close" to fair value. Welling sees "significant near-term catalysts" in the stock related to margins and cost structure optimization, and said it was trading in line with its historical valuation over the past 10 years, as well as at a significant discount to peer company Aaron’s. Engaged owns more than 5.3 million RCII shares, or about 10 percent, according to Bloomberg data.

Shares ended up less than 0.1 percent, but spiked after Welling began speaking.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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