Activist Investing: Strategies, Performance, Trends, Players & Some Companies Involved


You've probably seen growing numbers of headlines about activist investors and strategies in the financial media, but what do you know about this trend? Let’s take a look at what activist investing involves along with some examples of famous activist investors and themes you can follow.

What are activist strategies?

In most cases, activist strategies involve purchasing large quantities of a company’s stock, gaining access to its board of directors and influencing significant changes to business and operational strategies with the end goal of boosting shareholder value. Because you need quite a bit of capital to take on activist positions, most activist investors are hedge funds, private equity firms or very wealthy individuals.

A telltale sign when activist investors have selected a new target company is when they file Form 13D with the SEC. This filing is required when an investor purchases a 5% or larger stake in a company’s shares. These days, it’s not just troubled companies that are attracting activist investors. Big, profitable companies are also becoming targets. The activist billionaire investor Carl Icahn had prodded Apple CEO Tim Cook to return more of the company’s big stockpile of cash to investors when he was a shareholder. Apple obliged with share buybacks and higher dividends, helping Icahn make $2 billion in profits when he sold his Apple shares earlier this year.

Has investor activism returned value to shareholders?

If you share the same convictions as activist investors about their target companies, you just might be able to benefit from favorable performance in those stocks if their activist influence can turn a stock around.

The Week identified 71 activist campaigns against companies worth at least $5 billion dating back to 2009, when activism ramped up in a big way, and found that activism “often improves a company’s operational results — and nearly as often doesn’t.” Slightly more than half the companies examined had better shareholder returns than their competitors following activist demands, besting them by less than 5 percentage points.

Investor activism trends

Various factors are driving the rise in the activist investor.

  • The slowing global economic growth has motivated fund managers to squeeze more out of their positions,
  • the past successes of shareholders in ushering change at target companies,
  • broader shifts among institutional investors to band together...
  • more capital low interest rates that makes borrowing cheap, unprecedented in modern history. Interest rates have never been this low for this long.
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