Last week the Wall Street Journal published a report on 70 activist campaigns, looking back over the past six years. No surprise, in evaluating these campaigns, they found that activism works.
With the ability to buy controlling stakes in public companies, we know that activist investors can influence outcomes in the stocks they buy. They have the unique privilege of controlling their own destiny. With that edge, these investors have proven to produce a significant return over what the broader market gives you over time, on average.
When we follow these activist investors into stocks, piggybacking their moves, not only do we get to participate in their performance, for free, but we get an investor on our side that has a lot of money on the line (both their investor’s money and often a lot of their personal money). With that, we get to follow the lead of someone with power and influence, and with every incentive to see the campaign succeed.
Given their record of success, when an activist investor takes a position in a stock and publicly gives a price target for the stock, we take note.
In each of the five stocks listed below, a billionaire investor or hedge fund is calling for a double:
1) Macy’s (NYSE:M) – Starboard Value, a top $4 billion activist hedge fund, said at the Ira Sohn Hedge Fund Conference that Macy’s could be worth $125 a share if the company would sell or spin off its real estate. The stock today sells for $50.36. If Starboard is right, the stock has a 172% potential return.
2) NCR (NYSE:NCR) – Marcato Capital, a $3 billion activist hedge fund run by Bill Ackman’s protégé, Mick McGuire, said that NCR could be worth as much as $51 to $59 a share. The stock is $25 today. If McGuire is right, NCR has a double in it (or more).
3) Bob Evans (NASDAQ:BOBE) – Sandell Asset Management, a top billion dollar plus activist hedge fund, said that Bob Evans could be worth as much as $90 a share if it sold or spun off its real estate. Bob Evans sells for $44 a share. A move to $90 would be a 105% return.
4) Yum Brands (NYSE:YUM) – Carl Icahn protégé, Keith Meister, who runs the $8 billion activist hedge fund Corvex Management, said at Ira Sohn this year that YUM could be worth as much as $130 a share, if the company spun off its Chinese operations. With the stock selling at $70 that is an 86% potential return.
5) Brookdale Senior Living (NYSE:BKD) – Billionaire Larry Robbins of the $15 billion hedge fund Glenview Capital Management has said that Brookdale could double, as the company’s real estate was worth as much as its share price. That is when the stock was trading at $30. Today Brookdale sells for $22.87 which would imply a 161% potential return.
Sign up for our Free ebook, The Little Black Book of Billionaire Secrets, and learn how to follow the “best ideas” of the world’s top billionaire investors. You don’t have to be rich to take part. You don’t have to pay the hefty 2% management fee and 20% profit share to a hedge fund. You can follow the lead of powerful billionaire investors by simply buying the same stocks they do, in your own brokerage account.
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