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Continued from here:

iv) Activist Investors are the next catalyst I’d like to highlight. Obviously, there’s no well-defined timeline involved here, but considering the approach of most hedge funds (who comprise the majority of activists) and their return expectations, a timeline of 6 months to 2 years.

Activists targeting asset discounts/realizations will tend to have a shorter holding period, while activists seeking operational change are usually forced to adapt to a longer investment horizon. With the multitude of investment trusts and companies listed in London, activists have generally focused on the former type of operation, while elsewhere in the world they focus more on significant operational changes/improvements to a business.

Most activists tend to agitate for change (and prefer to work in a co-operative manner) behind the scenes with companies/management. In fact, sometimes the only evidence of activism is a trail of timely investing successes. Some prefer to be more public: Carl Icahn (if you can lay your hands on this biography, I highly recommend it, I read it at least once a year), the king of the activists, is the most obvious, and successful (pretty hot for a 76 year old, eh?), example. Other more notorious activists (and 13D filers) are Daniel Loeb of Third Point (and here, though Dan claims he’s mellowed out now..!) and Robert Chapman, who can likely claim credit for the introduction of the work ‘fuck‘ in a shareholder filing to the SEC. Incidentally, the last two are avid surfers (Third Point is a famous Malibu break)…hmm, maybe something in the water? I need to brush up on my surfing!

btw Other good reading material includes Wyser-Pratte‘s ‘Risk Arbitrage‘, Orol‘s ‘Extreme Value Hedging‘ and some chapters of Guy Thomas‘ ‘Free Capital‘. Damnit, I got the latter for Xmas, and still haven’t got to it – looks like the blogosphere has enjoyed reading this one!

It must be remembered that most activist investors have a value, event-driven and/or distressed investing perspective. They may well invest in a stock for the v same reasons as you, and may even have assessed pretty much the same upside potential. But the big difference from regular private investors is that they’re v impatient, they’re seeking high returns, they’re v aggressive AND they have the necessary fire-power to achieve their goals. Fire-power covers a host of tactics: Sometimes it’s just sheer weight of money (and they become the largest shareholder), but it also includes nominating directors to the board, conducting proxy fights, deposing and/or appointing management, suggesting operational changes and/or asset/business sales, scaring up bidders for a company (or even bidding themselves), demanding strategic reviews or even wind-downs or liquidations, etc. You see, one catalyst can quickly lead to another..!

So, how do you keep track of these guys? Mostly in the same way as I described in my prior catalyst: Keep your eye on the daily financial news, websites, blogs. Contemplate tackling the SEC EDGAR website, to track US filings. Search the Investegate and LSE websites. Always look at the shareholders of any company you’re vaguely interested in. All these work well for me, I find I pretty much do this unconsciously now. Recent props though to Praipus on ADVFN (UK, message board ticker is WAM) who does a good job of tracking UK activists. And who should you be tracking? Well, let’s go by country/region:

Ireland:   IIU (Dermot Desmond‘s vehicle), Focus Investments (a Davy fund vehicle) and Pageant Holdings. None of these claim to be activists, of course. Kevin Anderson on the other hand may justifiably claim to be the oldest activist in the world! Farringdon Capital (not an apparent activist) is another interesting shareholder that’s been popping up on Irish registers recently. Ray French of Strongbow Capital is another Irish activist, but has gone v quiet in the past year or two. I guess I could include TVC Holdings (TVCH:ID). But what they really need to do is either slash their salaries/costs or else get the finger out, sell UTV Media (UTV:LN) and finally buy some venture/distressed stakes in private Irish companies. What are they waiting for, a fucking recession..?!

UK:   Laxey, Weiss (Brookdale), QVT, Damille and Principle Capital (though Brian Myerson has gotten the ‘cold shoulder‘, in more ways than one, ahem!) are mainly interested in investment trusts/companies and other asset situations. Brian’s old pal Julian Treger (Audley Capital) is now mostly focused on natural resource stocks. Sherborne Investors and Crystal Amber have an operational focus. Hanover Investors and North Atlantic/Harwood Capital have a distressed/private equity perspective. Individual investors to look out for are Nigel Wray, Bob Morton (Southwind), Peter Gyllenhammar (Bronsstadet, Union Discount), Joe Lewis, Jim Mellon, Andrew Perloff (Panther Securities – just have a read of his Chairman’s Supplementary Ramblings in the annual reports..!), Vincent Tchenguiz and Jack Petchey (Trefick).

Europe:   Wyser-Pratte, Knight Vinke, Pardus, Cevian Capital (which has the unusual distinction that Carl Icahn has provided funding and co-invests with them), Vincent Bollore and Algebris (seeded by Chris Cooper-Hohn (TCI), who’s now mostly focused on the US).

US:   Well, obviously this is the home of shareholder activism – there are far too many activist hedge funds to list! So let’s stick to the biggest/brightest: Carl Icahn, Harbinger Capital (Philip Falcone, who has more than his fair share of troubles right now – but never underestimate a hockey player. Yes, of course I meant ice hockey!), Third Point (Dan Loeb), Eddie Lampert (ESL – focus on all his other v successful investments, not the whole Sears Holdings (SHLD:US) farce), Bill Ackman (Pershing Square – good grief, now he wants to be a currency activist!), Relational Investors (Ralph Whitworth), Bulldog Investors (Philip Goldstein), Trian Fund (Nelson Peltz), Jana Partners, Elliott Advisors/Intl., ValueAct Capital, and Steel Partners (Warren Lichtenstein, who’s almost single-handedly tried to also prove that not even activist investing works in Japan).

To be continued…