Looking At Newly Owned Activist Stocks by Stock Pucker
Welcoming a guest-type post. Here’s a look at what we’re doing with Activist Strategy. Don’t forget – sign up for our free daily newsletter to stay in the activist investing know. This is Part IV of our feature on companies that have multiple activist investor owners. Part I was about stocks that have seen activist investors renew their conviction. Part II was on a few companies where the “conviction” has reached a relatively high level. Part III was about underrated stocks with multiple activists. Part IV is about stocks with activist taking new positions.
Special Feature – Part IV: New activist owned stocks
None of these stocks have a formal activist campaign waged against them and some of these are big names you’ve heard of, others, not so much.
In his 2021 year-end letter, Baupost's Seth Klarman looked at the year in review and how COVID-19 swept through every part of our lives. He blamed much of the ills of the pandemic on those who choose not to get vaccinated while also expressing a dislike for the social division COVID-19 has caused. Q4 2021 Read More
Activist Stocks – No. 1: Precision Castparts (PCP)
$27 billion market cap
Industrial aerospace parts
Activists with new positions include Farallon Capital (owns 0.5%), ValueAct Capital and Third Point both own 0.4%, and Eminence Capital owns a small stake. Other notable hedge fund owner with a new stake includes Soroban Capital (owns 1.7%). Other notable hedge fund owners include Vulcan Value, 3G Capital and Warren Buffett.
PCP Thesis: Really just an industrial play on rising demand for higher priced auto parts. PCP is uniquely positioned to be an industry consolidator, however. Right up ValueAct’s alley [more on that here].
Activist Stocks – No. 2: Yum! Brands (YUM)
$38 billion market cap
New activist shareholders include the big 3: Third Point (owns 0.8%), Corvex Management (owns 0.2%) and JANA Partners owns (0.1%). Other notable hedge fund owner includes Senator Investment Group.
YUM Thesis: Split the U.S. and RoW operations from China. Creating a pure play fast food company with franchising growth opportunities. China continues to be a drag for the company, however. But there’s a few other bright spots for the company [here’s Third Point’s thesis]. Corvex’s Meister touted Yum! at this year’s Sohn conference [recap here].
Activist Stocks – No. 3: Fiat Chrysler (FCAU)
$20 billion market cap
Activists with new positions include Baker Street Capital (owns 0.3%) and FrontFour Capital with a small stake. Other notable owner includes Mohnish Pabrai’s Dalal Street with a 1.1% stake (has 42% of his fund in the name).
FCAU Thesis: Spinoff play with the Ferrari IPO coming up. After that, opportunities to merge with GM, or at least that’s Fiat’s hope. GM “activist” Harry Wilson has spoken against it and GM has rebuffed Fiat’s overtures twice in the last four years. But further consolidation needs to come to the automakers; it might take another downturn before GM realizes this. Here’s more on the Fiat appeal courtesy of Greenwood Partners [link].
Activist Stocks – No. 4: Mylan (MYL)
$33 billion market cap
Newest activist owners include Sachem Head Capital and LionEye Capital. Other notable owners include Paulson & Co. and North Tide Capital.
MYL Thesis: Really an M&A play with the buyout offer from Teva Pharma on the table. Mylan has rejected Teva several times, however. Mylan would rather go it alone by buying up Perrigo. More of an M&A arb play at this point – hence Paulson & Co.’s ownership.
Activist Stocks – No. 5: The Medicines Company (MDCO)
$2.3 billion market cap
Notable new activist fund owners are Corvex Management (3.1% stake) and Sarissa Capital (1.8% stake). Both the founders of these two funds are former Carl Icahn key grips. Other notable fund owners of Medicines Co. are Pointstate Capital and Royce & Associates (both own 3% plus).
MDCO Thesis: Lost a Hospira patent case this month, but there’s now more certainty surrounding the company and its products. The overhang from the decision had kept investors at bay, with the focus shifting to other newly approved products and pipeline.