ValueAct Capital

Activist investor ValueAct Capital Management has long flown under the radar, working behind the scenes to turn companies around.

After it nabbed a board seat at Microsoft Corp. in August, the first time a shareholder not affiliated with Microsoft landed a director post, appreciation has spread notably beyond its investor base .

Chief executives seem more willing to take calls, said ValueAct founder Jeffrey Ubben, a lanky former Fidelity portfolio manager who grew up outside Chicago.

Jeff Ubben of ValueAct Jason Henry for The Wall Street Journal

But its maneuverability appears to have been dented. For most of its history, stock prices of companies it took activist stakes in generally ticked down in the year after the firm disclosed its positions, letting it scoop up more shares for a discount, said ValueAct President and Microsoft board member Mason Morfit.

In the last year, the stock prices of its picks have “popped” as other investors mimic ValueAct’s moves.

All the attention is “to our chagrin,” Mr. Morfit added.

Then, there is the issue of privacy. Mr. Ubben and his wife, college sweethearts at Duke University, lead largely private lives. Now, an utterance he considers throwaway can make headlines.

ValueAct doesn’t consider itself a typical hedge fund. Its San Francisco location distances it from the circuit of parties and idea dinners in New York Mr. Morfit says can contribute to groupthink among some New York funds, and encourages the firm to fly out to companies it is looking at rather than wait for management teams to traipse through town. Mr. Ubben says he doesn’t collect art and doesn’t have time to train for marathons or triathlons. He does enjoy being active outside, he adds.

ValueAct’s strategy since its 2000 start has been to find what it believes to be strong businesses that have been mismanaged or misunderstood, then take a board seat and work with the companies to improve them over the long haul. Maneuvers like spin-offs or debt-fueled recapitalizations, which some activists push for, aren’t its M.O.

Relationships with large institutional investors like T. Rowe Price and Fidelity Investments can give it clout even with smaller stakes, the firm said.

Even former Microsoft CEO Steve Ballmer noticed a change at his company when ValueAct showed up last April, saying shares were undervalued in part because investors were overlooking Microsoft’s continued success selling many of its software products to corporations. The longtime executive credited ValueAct for helping to change investor sentiment toward Microsoft.

“Maybe starting with the ValueAct investmentthere was a wave of, ‘Oh yeah those guys have a phenomenal enterprise business,’” Mr. Ballmer said in a May interview.

The other sea change at Microsoft around ValueAct’s investment was Mr. Ballmer’s surprise retirement, announced a week before ValueAct got on the board. Mr. Ballmer and other Microsoft officials said pressure from ValueAct played no role in his departure.

Microsoft isn’t ValueAct’s first turn in the spotlight.

Not too long after it launched, the firm invested in Martha Stewart Living Omnimedia Inc. only to see its eponymous founder facing criminal charges over obstruction of justice in an insider trading case.

The turmoil lifted Mr. Ubben to chairman of the board. For two years of what he described as “Chinese water torture,” the press hounded him for details and the company struggled under Ms. Stewart’s troubles. The experience influenced his decision to try and avoid the headlines some activists crave.

“It was probably good for ValueAct because we didn’t fold,” Mr. Ubben said. “We made some money. It was all battle money.”