An examination of activist campaigns which are currently underway indicates that shareholders appreciate the efforts of those who pressure companies’ management to return more cash to them. In a report dated April 3, 2014 analyst Stuart Kaiser and the rest of the team at Goldman Sachs identified 42 different activist campaigns which are all targeted at Russell 3000 companies.
Cash return to shareholder campaigns push outperformance
Most of those efforts have been aimed at board representation and enhancing shareholder value. They have also outperformed the index by an average of 154 basis points since the announcement of the campaign. Here’s a look at the 42 campaigns identified by Goldman Sachs analysts. The analysts believe demands for strong balance sheets to be “put to work” and also strong performance of these stocks will continue.
Campaigns about cash return have also pushed stocks beyond that of the S&P 500.
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Highlighting Jos. A. Bank, Juniper, eBay
As you can see, most of the highly publicized activist campaigns are included on this list. The well-documented campaign against Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) launched by Eminence Capital tops the list. The firm was seeking board representation. Second on the list is the battle against Juniper Networks, Inc. (NYSE:JNPR), which is being run by Elliott Management, which is seeking to maximize shareholder value. In fact, a separate campaign against the company which is being run by JANA Partners is a bit further down the list. The firm is seeking board representation.
Carl Iachn’s campaign against eBay Inc (NASDAQ:EBAY) is also on the list, but a bit further down.
Trends in activist-related outperformance
The Goldman Sachs team forecasts 20% buyback growth this year. They note that activity slows down during earnings but that announcements could increase, supporting the theme. They say that on average, these stocks tend to post their “strongest average returns and most consistent outperformance” between the months of February and December.
The analysts say that in general, these stocks perform more weakly during the earnings reporting months—January, April, July and October. Those are also usually the months when share repurchases are at their lowest because companies are entering into quarterly lock-up periods.