Activist investors are the polar opposite of traditional passive buy-and-hold investors. Rather than betting on a company’s history and expectations, activists want to shake things up and make companies do what they feel can boost shareholder value. Following activist investors would definitely fit within a Strategic Bull strategy.
Summer is often slow for big news developments in the financial markets. After the “Sell in May and go away” theme plays out, many investors go bargain hunting. Some activists have gone bargain hunting, but some were active even ahead of summer in 2024. May and June were months littered with activist investors making waves with new investments and pressing for boards of existing investments to take action.
Oggonomics has compiled a list of current activist investor theme stocks with news around their investments. These investors believe that value can be unlocked in these stocks regardless of the current stock market trends. If that isn’t a “strategic bull” then what is? Just keep in mind that some activist shareholders are more successful (and realistic) than others. And also keep in mind that this so-called “whale chasing” strategy offers no assurances or guarantees of profits. It turns out that grouchy billionaires can lose money too.
ACTIVIST TARGETS
Rapid7, Inc. (NASDAQ: RPD) saw its shares surge in the last week of June on reports that activist investor Jana Partners has acquired a stake in the company. Jane reportedly plans to push Rapid7 to sell the cybersecurity company. Reuters had even reported in 2023 that Rapid7 was already exploring alternatives that included a potential sale. Jana Partners is also pressing Rapid7 to improve its operations and forecasting after it recently lowered its 2024 outlook. Rapid7’s stock was at $37.50 and then surged to $41 on the Jana news. It closed up an additional 1.2% at $43.23 on Friday. Rapid7’s 52-week range is $35.08 to $61.88.
Autodesk Inc. (NASDAQ: ADSK) already has roughly a $500 million stake by activist investor Starboard Value. On June 17, Starboard announced it was filing a suit against Autodesk to nominate new directors to the board. Starboard alleged that the company misled shareholders. Starboard is also targeting efforts to boost margins and add new board members. That said, on June 20, the Delaware Court of Chancery denied the plaintiff’s motion to expedite litigation that could have delayed the annual meeting (scheduled for July 16, 2024). One optical issue with Starboard’s stake is that it is nowhere close to being in the top-10 holders and it’s roughly just a 1% stake. While Autodesk shares fell from about $265 in March to under $200 by the end of May, the recent earnings reaction took shares from a recovery point of $225 back up to $240. Perhaps the real issue here is that Autodesk peaked around $330 back in 2021 while may tech giants have continued to surge. At $242.31 with a $52 billion market cap, Autodesk’s 52-week range is $192.01 to $279.53 and its consensus analyst price target is $271.89.
Rentokil Initial plc (NYSE: RTO), Terminix’s parent company, recently saw its shares surge on the news that activist investor Nelson Peltz’s Trian Fund Management LP is now a top-10 shareholder in the U.K. pest control, hygiene and workwear company. Trian has also held discussions over initiatives aimed to boost shareholder value. Rentokil has faced weakness in its U.S. operations.
Southwest Airlines (NYSE: LUV) used to be the posterchild for what airlines should do. That was then, After years of struggling, Elliott Investment Management has amassed close to a $1.9 billion stake and is alleging that Southwest needs to move forward from its past. Elliott’s 11% economic interest is now a top holder of the company and its aggressive moves are calling for its CEO to be fired and replaced. The activist also seeks an overhaul of Southwest’s board of directors and is even looking to shake up the business model. Can you say “seat assignments” anyone? While activists often shun airlines, Carl Icahn reached a deal with JetBlue Airways (NASDAQ: JBLU) earlier in 2024 for two board seats after he took a large stake. And just this week came additional news from Southwest warning about its revenue metrics, although the stock hardly sold off on the news.
Vestis Corporation (NYSE: VSTS) announced on June 20 the appointment of Keith Meister to its Board of Directors. Meister is CIO of Corvex Management LP. The appointment was effective immediately and the size of the Vestis board rose to 9 from 8 in the move — and 7 of the 9 are now independent directors. Meister is well known in the investing community and Corvex’s 12.9% stake would represent the largest outside holder if Blackrock (12.1% stake) and Vanguard (10.9% stake) have not added to their stakes. Meister is currently on the boards of GeneDx Holdings Corp. and MGM Resorts International. Some of his larger prior board memberships include Yum! Brands, The Williams Companies, ADT Corporation and Ralcorp Holdings. This maker of uniforms and workplace supplies was a $22 stock early in 2024, and at the start of May the shares fell from $18 to almost $9 after disastrous earnings and lower guidance before more recently recovering to $12.00.
VF Corp. (NYSE: VFC) has seen its share of problems in 2024. With brands like North Face and Timberland, Vans is its largest brand and accounts for about one-third of sales. May’s earnings report showed no turn for a would-be turnaround but CEO Bracken Darrell bought his second batch of VFC shares on June 10 with a 75,200 share purchase at $13.26 weighted average cost. With shares down more than 80% since 2019, VFC is already dealing with activist investor Engaged Capital (with backing of the founding family) and previously had Legion Partners there as well. Engaged had issued a large report in late-2023 with cost cuts and reviews for noncore divestments that should help the stock double within three years. VFC recently closed at $14.31, with a 52-week range of $11.00 to $21.17 and a consensus analyst price target of $13.10.
Walt Disney Company (NYSE: DIS) won its proxy fight with Nelson Peltz. Or did it? Reports in late-May and in June showed that Peltz’s Trian dumped its entire stake in Walt Disney shares when it did not get its way in the proxy fight. If Peltz really was able to unload his entire stake anywhere close to the $120 reported at the time, then he made about $1 billion for his efforts. And as Disney’s shareholders re-elected Disney’s full lineup of board nominees the company may have some answering to do now that its stock is close to $102. Disney’s ESPN no longer is given the same worries that used to be there, but Disney’s current challenges are the newsworthiness of news, the directional bias in its content, rising operating costs in all segments, peak-streaming and the high costs of getting to and then entering Disney’s theme parks when consumers are already strapped.
WHAT ABOUT ACTIVIST FUNDS?
The 13D Activist I (DDDIX) mutual fund has about $156 million in assets at the present time. The fund’s objective is to primarily invest in U.S. stocks which are the target of shareholder activism where the stakeholders are generally active in their efforts and have publicly disclosed a catalyst for change.
The LeaderShares Activist Leaders ETF (NYSEArca: ACTV) is a $80 million ETF at the present time. It invests in equities that are the target of shareholder activism. These equities are within active 13D filings and generally have more than 5% of a company’s shares looking to make change within a company.
NO GUARANTEES TO BE FOUND!
As noted above, some activist shareholders are more successful than others and chasing whales comes with no assurances or guaranteed profits. Some activists simply cannot make some companies budge no matter how hard they try. That means you might not win just because these activists have a track record of winning.
