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Jana Partners takes long position in Microsoft

Barry Rosenstein
Adam Jeffery | CNBC
Barry Rosenstein

Activist hedge fund Jana Partners took a long position in Microsoft during the third quarter, according to an investor letter.

The firm bought an unspecified stake in the software giant when it dipped with broader markets in August. Microsoft shares have jumped about 30 percent since the start of September.

Jana sees potential for Microsoft to improve operating margins and trim costs. The firm also cited Microsoft's "strong capital return program" and potential to increase dividends, as well as growth in its Azure cloud computing business.

Jana also unveiled a long position in Baxter International, a health care company.

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Microsoft was one of the few bright spots for Jana in the third quarter, when its Master Fund was down 8.2 percent. It lost nearly 7 percent for the year through the end of September.

CNBC's Tae Kim contributed to this report.