#$mwv

[alphaattribution]

DRI advanced Starboard Value. ODP did not

Starboard Value Lp returns an estimated -1.85% for June 2015 - the fully hedged version returns -0.18%

Starboard Value generated a -1.85% return on their publicly disclosed long portfolio for the month ending June 2015, underperforming the S&P500 by 186 basis points (bp). On a hedged basis, the portfolio would have returned -0.18% StockAlpha over the same period. Starboard's StockAlpha reflects the return of the net return if each security in their portfolio was hedged with a sector ETF, such that the resulting portfolio was market, beta and sector neutral. StockAlpha in the Cons. Disc. sector contributed the most to StockAlpha during the month.

Positive Contributors to Starboard's Returns

Starboard’s position in Darden Restaurants (DRI) contributed the most to the performance of the manager’s long-portfolio during the month. Over the month of June 2015, Starboard's 25.2% position in Darden Restaurants (DRI) increased in value by 8.1%, contributing 2.03% (25.2%*8.1%=2.03%)to the long portfolios overall return. Looking at Starboard's portfolio through a fully hedged StockAlpha lens, the holding of Darden Restaurants (DRI) also provided the largest contribution to fully hedged returns. Darden Restaurants (DRI) returned 8.1% during the month compared to the Cons. Disc. sector, which returned 0.6%. As a result, after taking into account Darden Restaurants (DRI)'s beta relative to its sector, the position contributed 1.9% of StockAlpha to the Starboard’s monthly performance.

Negative Contributors to Starboard's Returns

Much of the drag on Starboard’s long-portfolio during the month can be attributed to the holding of MeadWestvaco Corporation (MWV). Over the month of June 2015, the manager's 15.7% position in MeadWestvaco Corporation (MWV) returned -6.8%, contributing -1.06% (15.7%*-6.8%=-1.06%)to the long portfolios overall return. Looking at Starboard's portfolio through a fully hedged StockAlpha lens, the holding of Office Depot Inc. (ODP) provided the most negative contribution to fully hedged returns. Office Depot Inc. (ODP) returned -6.6% during the month compared to the Cons. Disc. sector, which returned 0.6%. As a result, the position contributed -0.9% of StockAlpha to the manager’s monthly performance.

Overlap with other hedge funds

Starboard’s top 10 largest positions, Wausau Paper Corp. (WPP) is the name that is owned by most other hedge funds. 1.8% of hedge funds within Symmetric's universe had a position in Wausau Paper Corp. (WPP) as of March 31, 2015, making it a contrarian name relative to other stocks, even though it is the most consensus within the manager's top positions. Starboard initiated its position in Wausau Paper Corp. (WPP) 3.75 years ago. Overall, Starboard's book is contrarian, with the average position held in the portfolio held by 8.6% of hedge funds. Use Symmetric to surface managers with unique sources of alpha and flag those that may be in trouble.

[jasonraznick]

A Look Into This Midcap Trading At All Time Highs

MeadWestvaco shares are gearing up for a breakout or sell off as the stock floats within $0.10 of its $44.85 all time high.

Based out of Richmond, Virginia, MeadWestvaco derives 82 percent of its revenue selling packaging products and 18 percent from specialty chemicals.

(image from investor presentation)

Financials

In terms of value, MeadWestvaco looks to be trading at favorable ratios compared to its competitors. Multiples are inline with the containers and packaging industry average while the company has been able to increase its earnings much more significantly than average for several years. EPS is expected to increase by an additional 20 percent next year compared to 13 percent for the industry.

This growth can be attributed to a major focus on cost cutting. CEO John Luke commented in the company’s most recent conference call, “Our result demonstrate that we’re on track toward our goal of achieving industry-leading margins.”

One concern is that sales growth has lagged peers in recent years. As can be seen in the image above, emerging markets play a significant role in MeadWestvaco’s business. Over the next five years, IBISWorld expects domestic sales of packaging products to slow to 1.9 percent. Because the company draws a significant portion of its revenue from emerging markets, the company is positioned to take advantage of faster growing markets. The rate of development in Brazil will be especially interesting.

Activist Interest

MeadWestvaco is one of the largest holdings of activist fund Starboard Value, making up 16 percent of the fund’s portfolio. At CNBC’s Delivering Alpha conference in July, Starboard’s CEO Jeff Smith commented that he believes the stock is worth $59 per share (33 percent upside). Starboard has made several suggestions to maximize shareholder value, including selling the specialty chemical business and engaging a $500 million buyback. Shares rose five percent on Starboard’s initial comments (in a 13D filing), indicating the market thinks these changes are feasible.

Another implication of Starboard’s position is that pressure will continue to be on management to increase margins, which it has so far been successful doing.

Shares closed at $44.72 Tuesday.