In this article, we will take a look at the 15 Stocks Targeted By Activist Hedge Funds.
Shareholder activism continued at a record pace in 2024 as activist hedge funds pushed for strategic changes in various companies to unlock hidden value. In the first nine months of the year, 184 activist hedge fund campaigns were up and running, 26% above the four-year average. The surge came as new activists joined the fray and spearheaded 22% of the campaigns.
Why Was Shareholder Activism on The Rise?
A number of factors can be emphasized. One is the global economy cooling down. Although the US economy appeared to be on track to a soft landing, as many experts had predicted, economic growth remained timid, and other nations like Germany were on the verge of going into recession.
The rise of so-called ESG investing is another factor contributing to increased shareholder activism. Environmental, social, and governance, or ESG, is a relatively recent trend in which investors purchase stock in a company for its intrinsic value and because it performs well on ESG metrics. Some activist investors have positioned themselves as ESG-focused in the midst of this trend.
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Nevertheless, only 30% of the top ten activist investors accounted for the total campaigns in 2024, down from 46% in the same period in 2023. On the other hand, most of the campaigns were less successful in breaking into company boardrooms as management fought back.
Management pushed back on several campaigns even as activist hedge funds were forced to settle on management changes. Additionally, as investors’ newfound freedom to choose between management and dissident slates makes it easier to get representation on boards, the universal proxy card continues to lead to more settlements between activists and businesses.
Even though winning board seats isn’t the main goal of every campaign, the quantity of victories indicates how well businesses are defending themselves. Dissidents won 74 seats in the first half, compared to 93 in the same period in 2023. Activists only secured 11% of the seats they were vying for in US proxy elections, compared to 65% in 2023.
Similarly, a push for company sales by activist hedge funds hit a snag as buyouts throughout the year were scarce owing to the high interest rate environment. High interest rates made it difficult for companies to access cheap capital that they could use to complete acquisitions.
According to Jim Rossman, head of the Barclays advisory group, there hasn’t been much merger and acquisition activity in the past two years. The activists’ preferred method of obtaining value from a company’s stock is weakened as a result. The most frequent demand of activists is still M&A, but they are now more focused on altering a company’s board and management.
“Activism has become increasingly sophisticated as a tactic,” says Rossman, who sees firms…