Earlier this week we published our flagship report, the Activist Investing Annual Review 2017. Produced in association with international law firm Schulte Roth & Zabel, the Review should be substantial enough at a whopping 44 pages to speak for itself. But I think it would be wrong of me to let the moment pass without sharing some of the thoughts I had while pulling it all together.
First of all, consider the volume of activism over the past year. An increasingly crowded market, boosted by occasional activists, first-timers, and increasingly-pressurized institutions like mutual and pension funds, means more companies than ever are being subjected to the tools activists have traditionally used. Modest growth in the U.S., and much faster rises in European and Asian activity – mostly fueled by domestic activists – contributed to a total of 758 companies publicly targeted.
Beneath that veneer, however, dedicated activists have been quieter. What we term primary and partial focus activists targeted roughly the same number of companies worldwide, but more than 20 fewer issuers in the U.S. Most of the drop was in large cap targets, which fell by 17. For all those who looked down market, where the bulk of activity has always been, there were others who simply had a quiet year.
Our sponsors at Schulte Roth & Zabel are optimistic that large cap activism will come roaring back and have some fresh examples to point to. Better performance in the second half of the year saw the Activist Insight Index once again overtake the S&P 500 Index and activist-owned stocks perform better than the S&P 500 as a whole – albeit probably fueled in part by rallies in markets impacted by currency devaluations, such as the U.K. That may make activists bolder and more ambitious, but the hunt for value may be harder in 2017 – possibly pushing activists towards more cyclical stocks in commodity-linked industries.
Some further highlights from the report are worthy of mention. To complement the Activist Top Ten, led again by the ever-present Elliott Management, we now have what I wanted to call the Short Top Ten, namely because it focuses on short sellers and only has five members. Glaucus Research, one of several short sellers to “break” Japan in 2016, came out tops.
Research from our sister company, Proxy Insight, highlights the degree to which institutional investors deviate from proxy voting advisers – information I hope will become more well-known in 2017 if we have to sit through more debates on the merits of legislating on them.
And finally, we have excellent input from three other sponsors – Georgeson, MacKenzie Partners and the new activism defense team at Raymond James. To all those who contributed, I’m very grateful. And as the Review shapes some of the debates to be had over the next year, we look forward to matching our expectations up against the data.
Article by Activist Insight