Starboard Value's Jeff Smith breaks down 3 latest ideas as the prolific activist pushes for changes

Published Wed, Oct 6 202111:48 AM EDTUpdated Wed, Oct 6 20213:36 PM EDT

Starboard Value CEO and chief investment officer Jeff Smith broke down his latest ideas, as the prolific activist investor pushes for changes in companies across the veterinary, chemicals and health-care industries. The hedge fund manager spoke to CNBC's David Faber on Wednesday at the 13D Monitor's Active-Passive Investor Summit in New York City. Starboard Value manages about $5.5 billion in assets as of 2019. Smith spun the New York-based hedge fund out of investment firm Ramius in 2011. Elanco Animal Health Smith said Starboard Value recently increased its position in Elanco Animal Health "dramatically." "The company came public, spun out of Eli Lilly years ago and there was a lot of hope that they were going to be able to follow the blueprint and be able to dramatically improve their margins," Smith said. "It's a great business. It's animal health in both pets and farm animals." However, the investor was not pleased with Elanco's recent merger with Bayer's animal health business, as the company failed to increased its margins as projected. Still, Smith said it's "water under the bridge," and he continues to believe Elanco has great value and is on track to deliver promising results for its shareholders. "We get to buy into the company, great business, at roughly the same value as when it spun out and came public, except it's a much better positioned company. We think it's set to succeed. We need to see the execution follow the promise," Smith said. Shares of Elanco are up about 6.5% this year after a 4% gain in 2020. Huntsman Smith's next idea is chemical manufacturer Huntsman , in which he has a $500 million-plus stake, according to a recent 13D regulatory filing. "Huntsman's a great company. It's a chemical's business, trying to replace their manufacturing footprint. Their technology, their knowhow is almost impossible," Smith said. "Terrific barriers to entry unfortunately, since the IPO, the stock hasn't done anything." The company went public in 2004 at $23 per share, according to Nasdaq, and shares are trading around $31 as of Wednesday. Smith is bullish on the company's recent moves to revamp its portfolio to focus more on value-added chemicals, which should translate into revenue and margins growth, he said. Colfax Smith is also pushing for changes in Colfax , a company with two different businesses — welding and medical devices. The businesses are "terrific in their own right but obviously they don't belong together," Smith said. "We've seen this time and time again. If you can liberate those businesses, you can enable each management team to just focus on their business." The activist investor said the existing leadership is going with the med-tech business, which he believes will grow its revenue and margins. "There is an opportunity for operational improvement especially on the med tech business ... we think you're getting the med tech business at almost half value with the opportunity to improve that business," Smith said. Shares of Colfax have gained more than 24% this year.

Jeffrey Smith, CEO and chief investment officer at Starboard Value LP.

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