Activist investors are a bit like Marmite. If you’re a more passive investor in a stock where an activist is kicking up a stink and shaking down a company’s management you probably love them. If you’re the Board of the target company you may take a slightly less positive view, particularly if the activist in question chooses to go public with their thoughts and recommendations in an attempt to effect change.
The good news about activist investors is that they put their money where their mouths are, buy shares in the companies they target and then seek to exert influence from within. Implicitly, therefore, they perceive there to be hidden value in the businesses they have in their crosshairs. It may be that they see opportunities for costs to be cut, structures to be streamlined, strategies to be simplified or M&A opportunities to be capitalised upon. One way or another they’re in it to win it, by catalysing a revaluation of the shares.
In effect, therefore, an activist is an outsider taking a fresh look at a business without being burdened by entrenched thin
I think there are two lessons that can be drawn from an activist approach.
First, when running an investment portfolio it can be valuable to test one’s conviction from time to time by asking the question, “If I didn’t already own this stock, would I buy it today?” If the answer is a negative this is likely to be a sign that you should consider divesting.
Secondly – and this is harder – I think business owners can benefit from stepping away from their company from time to time to ask a similar question: “If I was coming into this business afresh today, what could I or would I change or do differently to make it better?” With a disciplined approach this may identify a few cows whose time in the company pasture needs to end.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
king, corporate politics or the fields of sacred cows that graze freely inside many large corporations.