If you ask 10 investment professionals to define “activist investing,” you’ll probably get 10 different answers.
One example is Olstein Capital Management, a value-oriented investment firm based in Purchase, New York. Define Activist investing is a “unique form of value investing that targets companies that have significantly underperformed their peers and the broader market over a significant period of time.”
But in most cases, an activist investor’s primary goal remains the same: to increase shareholder value. And there are many ways to do this. Activist investments can affect companies and stock prices.
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“Activist investors are making large investments in minority shareholders. common stock Olstein Capital Management says the two main ways to do so are through corporate governance and by leveraging surplus funds to increase shareholder value. dividend or Stock buyback.
Not all activist investment campaigns are successful, but the following five examples prove they can be effective.
Frontier Communications/Jana Partners
Activist investor based in New York City Yana Partners announced On October 17, 2023, the company frontier communications (FYBR) is one of America’s largest pure fiber optic providers.
Speaking at 13D Monitor’s Active Passive Investor Summit, Jana Managing Partner Scott Ostfeld said he felt Jana was undervalued and that the company could be sold to a major carrier or private equity firm. said it should.
December 2023, Yana sent a letter It called on the company to conduct a “comprehensive review of strategic alternatives to maximize value for shareholders.”
frontier Officially announces strategic review The company also said that the review, effective February 5, 2024, is not a new review but is ongoing. Telecom services stocks have risen nearly 50% since Jana’s active listing.
VF Corp/Engaged Capital
VF Corporation (VFC) is a Colorado-based apparel conglomerate whose best-known brands include The North Face, Vans, and Timberland. As of January 2020, the company’s stock was trading above $100.
However, the stock price soon began to decline as profits and revenues declined. And to increase cash, VFC cut his February 2023 quarterly dividend. As a result, VF Corp was removed from the Dividend Aristocrat group. best dividend stocks Companies in the S&P 500 that have increased their dividends for at least the past 25 years.
October 2023, California-based activist investor Capital involved announced It means that he has invested in a business that is in trouble.It suggested that VFC reduces annual costs by $300 million and divest non-core brands.
On February 13, 2024, VF Corp announced the appointment of Caroline Brown to its Board of Directors. Engaged Capital, which held a 1.3% stake in the company as of December 31, 2023, approved her appointment. The activist investor also recommended that the company appoint a second independent director.
Engaged Capital’s shake-up of VF Corp’s board is part of CEO Bracken Darrell’s plan to help revive the company’s fortunes. Shareholders should ultimately benefit from this.
News Corp/Starboard Value
In September 2023, Rupert Murdoch resigned as chairman. News Corp (NWS, NWSA).
Less than a month later, starboard value CEO Jeff Smith spoke at 13D Monitor’s Active Passive Investor Summit and outlined his ideas for adding value to shareholders. Starboard holds 1.7 million Class A shares and 8.73 million Class B shares.
Mr. Smith said he believed one thing. duty free spinoff News Corp’s digital real estate assets are valued at $7 billion. In addition, the company Dual class share structurewhich allows the Murdoch family to maintain control.
The effort has not yet been disclosed as Starboard has acquired a stake, but NWS stock has risen more than 20% since the activist investor’s initial announcement. NWSA stock is up 22%.
Goodyear/Elliott Investment Management
Perhaps one of the most successful activist campaigns in recent memory is: Elliott Investment Management promote change in goodyear tires & rubber (GT).
May 11, 2023, Activist Investor sent a letter and a presentation to Goodyear’s board of directors outlining ideas for realizing future shareholder value. Mr. Elliott argued that the company’s business strategy was deeply flawed, and that combined with declining profit margins, the stock price had chronically underperformed, falling 21% over the past five years. By comparison, the S&P 500 is up nearly 85% over the same period.
Under pressure from Elliott, CEO Richard Kramer announced he would step down from the top job in 2024. The company appointed former CEO Mark Stewart in January. Stellantis (STLA)’s Chief Operating Officer for North America becomes the new CEO. Furthermore, Goodyear appointed Three new directors have been appointed as part of the cooperation agreement with Elliott.
Work is underway, but Goodyear stock is trending higher.
Advance Auto Parts/Legion Partners Asset Management
Legion Partners Asset Management owns 1.3% of advanced auto parts (AAP), creates an auto parts retailer Second largest holding.
In December 2023, Legion co-founder and managing director Chris Kiper revealed The company clarified the hedge fund’s position within the company and admitted that it had already held discussions with the company.
Legion is pushing Advance Auto Parts to sell OEM auto parts wholesale distributor WorldPac, which could generate up to $3 billion in revenue. It also recommended that employees’ salaries be increased in order to be more competitive with other companies in the industry.
In March, activist investors Third Point and Saddle Point Management entered into a cooperation agreement with the company, resulting in Three independent directors added to the board of directors. Without the Legion’s involvement, activists might not have invested in Advance.
AAP stock has risen more than 30% in the past six months.
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