×
Pro Analysis

Here's why hedge fund ValueAct bought Seagate

Jeffrey Ubben
Source: BusinessWire
Jeffrey Ubben

While most on Wall Street these days are huddling in yield plays, Jeff Ubben seems to be taking on more risk. His activist hedge fund ValueAct turned heads Friday with the disclosure of a new large stake in Seagate Technology.

This follows the purchase of battered bank Morgan Stanley in mid-August. The ValueAct chief executive officer told CNBC PRO why his fund is buying these riskier names.

Seagate announced the hedge fund will acquire a 9.5 million share stake in the company through a secondary transaction conditioned on regulatory approval.

Historically, ValueAct is known for focusing on "good" businesses with pricing power and strong intellectual property positions, primarily with subscription or services-oriented business models.

When contacted for this story Ubben elaborated on why the fund is now buying "higher-risk" stocks, saying in an email, "High recurring revenue models with pricing power type companies are priced for a 5-6% total return. We seek 15%."

He went on: