Ahead of the publication of our Q3 13F Summary later this month, Diligent Market Intelligence (DMI) takes a look at some of the more notable changes in activist investors’ portfolios as they reassessed their positions:
Old fights
Several activists took advantage of a recent market upturn to exit long held positions in companies where they, or others, had fought proxy fights.
Legion Partners Asset Management divested its 1 million shares in former activism target Guess, where it fought and lost a proxy fight to remove founders Maurice Marciano and Paul Marciano. The investment generated a total follower return of negative 2.95% since Legion disclosed it, according to DMI data.
Carl Icahn exited his position in Xerox Holdings in the third quarter. Since disclosing a stake in 2015, Icahn fought four separate campaigns with the office technology company, the last in 2021. The stock currently trades at less than $14 per share, down from a range in the high $20s recorded throughout 2015. The veteran activist also reduced his position in Newell Brands after gaining a board seat in February following his second campaign at the commercial and consumer products company.
Jeff Smith’s Starboard Value exited a sizable but short-lived stake in Abcam, a U.K. biotech supplier which recently secured approval for its sale to Danaher despite opposition from founder Jonathan Milner. Starboard also exited its position in cybersecurity company Splunk after it agreed to sell itself to Cisco Systems, a U.S. networking equipment maker.
New fights
Several new investments in the quarter have already led to proxy contests.
Jana Partners followed up its purchase of 8.3 million shares in Frontier Communications with calls for a sale of the U.S. telecommunications company.
Engaged Capital took a new 1.3% stake in apparel brand owner VF Corp., and subsequently demanded cost cuts and asset sales. The stock closed at $17.21 per share on November 17, little changed from September 30. The fund also took a toehold stake in Canadian company Primo Water, where Legion Partners settled for two board seats in May.
Jeff Smith’s Starboard Value declared an 8.3-million-share stake in U.S. restaurant group Bloomin’ Brands and is now agitating for operational improvements.
Engine Capital’s most notable new investment in the period was a nearly 3-million-share position in MRC Global, where it has called on the U.S. mechanical power equipment provider to explore a potential sale.
Nelson Peltz’s Trian Fund Management, meanwhile, increased its stake in Disney from 6.4 million to nearly 33 million shares. The increases, due largely to an arrangement that gives Peltz’s firm sole voting power over Disney shares owned by former Marvel boss Ike Perlmutter, came ahead of reports that Peltz is considering another board push at the media giant.
Technology and healthcare
The season saw shareholder activists load up on healthcare and tech stocks, continuing a trend observed for the last few quarters. In the second quarter of 2023, healthcare attracted the most investment, while in the first quarter, it was technology that topped the list.
Third Point’s largest purchases included a stake in Meta Platforms worth over $330 million. Bill Ackman’s Pershing Square raised its stake in Alphabet in Q3, while trimming its position in U.S. home improvement retailer Lowe’s.
Elliott Management took new stakes in both sectors. The hedge fund run by billionaire Paul Singer started new positions in British semiconductor and software design company Arm Holdings and U.S. pharmaceutical company Catalent.
Aron English’s hedge fund 22NW added a $1-million stake in U.S. healthcare company Psychemedics, a CAP certified clinical laboratory services provider for the detection of drugs.
Looking at activist trends so far in 2023, healthcare companies have accounted for 11.6% of activist demands so far this year, the highest proportion since DMI records began in 2013. The technology sector, meanwhile, accounted for 12.2%, the fourth most-targeted sector after industrials, consumer cyclical and financial services.