In this article, we discuss 10 stocks that activist investors are buying. If you want to skip our detailed analysis of these stocks, go directly to 5 Stocks Activist Investors are Buying.
2021 was a successful year for activist investors like Starboard Value and Carl Icahn, who pushed for significant changes in multiple prominent companies. In 2021, activist investors launched 89 campaigns which pushed for better shareholder outcomes, higher wages, sustainable operations, and improved performance. Due to COVID-19, activism in 2020 and 2021 remained below pre-Covid years, with 102 campaigns in 2019 and 113 in 2018. However, analysts believe that the number of campaigns will increase once the pandemic-driven work from home mandates subside and the economy goes back to normal activity.
Heading into 2022, activist investors are likely to pursue companies with depressed stock prices and non-compliant ESG names. Activism will be on the rise since 2021 proved that waging successful campaigns despite owning less than 5% of a company’s common stock is possible. The most prominent example from 2021 of minority activist shareholders shaking up big industry names is Engine No 1, with a 0.02% ownership stake in Exxon Mobil Corporation (NYSE:XOM) and the backing of passive investors, pushing for the replacement of three board members with candidates who were focused on a green future and actively involved in climate initiatives.
British companies with over $500 billion market cap were also increasingly targeted by activist investors, with household names like Unilever PLC (NYSE:UL), Shell plc (NYSE:RDS-A), and GlaxoSmithKline plc (NYSE:GSK) making headlines when activist investors pushed for operational efficiency.
Some of the most notable stocks from activist investor portfolios include Kohl’s Corporation (NYSE:KSS), Peloton Interactive, Inc. (NASDAQ:PTON), and Exxon Mobil Corporation (NYSE:XOM).
Paul Singer of Elliott Management
Our Methodology
We selected the companies that made headlines in 2021 and so far in 2022 when activist investors pushed for significant changes in management and operations. We have ranked the list according to the hedge fund sentiment surrounding the stocks.
Stocks Activist Investors are Buying
10. Taylor Wimpey plc (LSE:TW.L)
Number of Hedge Fund Holders: N/A
Taylor Wimpey plc (LSE:TW.L) is a British home construction company that was founded in 2007, after the merger of rival construction firms, namely Taylor Woodrow and George Wimpey.
Taylor Wimpey plc (LSE:TW.L) was on the radar of the US activist investment firm, Elliott Management, founded by billionaire Paul Singer, who is known to launch activist movements against the Argentinian government, BHP Group Limited (NYSE:BHP), and GlaxoSmithKline plc (NYSE:GSK), to name a few.
In December 2021, Elliott Management wrote a public letter to Taylor Wimpey plc (LSE:TW.L)’s chair Irene Dorner, stating that it is one of the top five investors of the company, and demanded that the CEO be replaced and hired from outside the organization. The activist investor was openly critical of the existing management’s “operational and strategic missteps” and “failed large-sites strategy”, and demanded that someone with greater experience must be positioned as chief executive offer. As a result, the existing CEO Peter Redfern announced that he would resign in 2022, after 15 years of service at Taylor Wimpey plc (LSE:TW.L).
On January 20, Morgan Stanley analyst Christopher Fremantle lowered the price target on Taylor Wimpey plc (LSE:TW.L) to £190 from £195 and kept an Overweight rating on the shares.
Like Kohl’s Corporation (NYSE:KSS), Peloton Interactive, Inc. (NASDAQ:PTON), and Exxon Mobil Corporation (NYSE:XOM), activist shareholders are paying attention to Taylor Wimpey plc (LSE:TW.L).
9. SSE plc (LSE:SSE.L)
Number of Hedge Fund Holders: N/A
SSE plc (LSE:SSE.L) is a British company that generates electricity from water, gas, coal, oil, and multi fuel, and supplies electricity to the United Kingdom and Scotland, serving both residential and commercial customers. The company is also involved in renewable power initiatives.
HSBC analyst Verity Mitchell on January 18 downgraded SSE plc (LSE:SSE.L) to Hold from Buy with a price target of £1,740, down from £1,810.
Paul Singer’s Elliott Management Corporation has been making strides in the United Kingdom lately, and in 2021, the activist firm targeted SSE plc (LSE:SSE.L), pushing for a split of its renewable arm from its regular operations. Elliott Management held a stake just under 5% in SSE plc (LSE:SSE.L), hence it did not need to be publicly disclosed, but the activist firm was one of the top five investors of the company.
SSE plc (LSE:SSE.L) announced on September 20 that it had resisted Elliott’s months-long pursuit of a split. On November 17, the company announced higher green spending initiatives through 2026, worth £12.5 billion, to appease Elliott Management and close the discussions on a split of its renewable power segment. Under the new investment plan, SSE plc (LSE:SSE.L) hopes to expand its renewable power five-fold to 50 terawatt hours a year by 2031.
8. Toshiba Corporation (OTC:TOSYY)
Number of Hedge Fund Holders: N/A
Toshiba Corporation (OTC:TOSYY) is a Japanese company specializing in electronics and storage solutions, supplying its products to customers worldwide. Toshiba Corporation (OTC:TOSYY) is primarily recognized for its rechargeable lithium-ion batteries, computers, visual products, and home appliances.
Effissimo Capital Management, a Singapore-based activist investor, owns a 9.9% ownership stake in Toshiba Corporation (OTC:TOSYY), and is the largest stakeholder of the company. Toshiba Corporation (OTC:TOSYY)’s investor base consists 25% of activist shareholders, who sided with Effissimo to push for the Toshiba Corporation (OTC:TOSYY)’s split into three independent companies in March 2021, effectively separating the energy infrastructure and engineering, electronic devices and AI, and memory chipmaker businesses.
This petition to split was based on the grounds that Toshiba Corporation (OTC:TOSYY) had lost its sheen like many other conglomerates, and there needs to be a focused story for investors. The performance will also improve when the company is split, much like General Electric Company (NYSE:GE) and Siemens Aktiengesellschaft (OTC:SIEGY). The company announced on November 12 plans to go through with the split by the second half of 2023.
On January 5, the second largest stakeholder of Toshiba Corporation (OTC:TOSYY), namely 3D Investment Partners, contested the decision to split. With a 7.6% stake in Toshiba Corporation (OTC:TOSYY), 3D Investment Partners has called for an extraordinary annual general meeting so that shareholders can come together and vote directly against the split.
7. Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 17
Headquartered in London, Unilever PLC (NYSE:UL) is a multinational consumer goods company that supplies a wide range of products including food, condiments, wellbeing supplements, cleaning agents, pet food, beauty products, and personal care items. Unilever PLC (NYSE:UL) serves customers worldwide with a portfolio of more than 400 brands.
American billionaire and activist investor Nelson Peltz, via his hedge fund Trian Partners, has built a position in Unilever PLC (NYSE:UL) and is pushing for changes in the multinational giant. His stake in Unilever PLC (NYSE:UL) is unknown as of January 24, 2022. Peltz is known for demanding operational improvements in the consumer goods sector, and his most famous activist campaign to date has been against The Procter & Gamble Company (NYSE:PG) in 2018.
Unilever PLC (NYSE:UL) reported on January 24 that it plans to cut at least 1500 jobs at the regional and divisional level in an effort to make its organizational model simpler and more category-focused, since it will help speed up the decision making process at the company.
James Edward Jones, the managing director of consumer research at the Royal Bank of Canada stated on January 25 that Unilever PLC (NYSE:UL) should focus on reinvesting cost savings into its brands and work on company culture, since “all new segment heads are Unilever incumbents.”
On January 24, after it was reported that activist fund Trian Partners headed by Nelson Peltz has built a stake in Unilever PLC (NYSE:UL), Jefferies analyst Martin Deboo noted that similar activist interventions have been associated with a 5% on-the-day return on average and a 15% sector-relative return to the point of exit, stating that the Trian involvement is likely to be “materially positive” for Unilever PLC (NYSE:UL). The analyst thinks that Peltz is likely to argue for a Home & Personal Care versus Foods split, noting that he has “long been of the view” that the right path to unlock value is via a faster rate of disposals from Unilever PLC (NYSE:UL)’s slow-growing Foods businesses, or a separation via a sale or spin. He kept a Buy rating on Unilever PLC (NYSE:UL) shares with a £3,675 price target.
In Q3 2021, 17 hedge funds in the database of Insider Monkey were long Unilever PLC (NYSE:UL), with stakes equaling $876.6 million. Gardner Russo & Gardner held the largest stake in the company at the end of the third quarter, with 9.4 million shares worth $510.4 million.
Here is what Fundsmith Equity Fund has to say about Unilever PLC (NYSE:UL) in its Q4 2021 investor letter:
“Unilever seems to be laboring under the weight of a management which is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business. The most obvious manifestation of this is the public spat it has become embroiled in over the refusal to supply Ben & Jerry’s ice cream in the West Bank. However, we think there are far more ludicrous examples which illustrate the problem. A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert — salads and sandwiches). Although Unilever had by far the worst performance of our consumer staples stocks during the pandemic, we continue to hold the shares because we think that its strong brands and distribution will triumph in the end.”
6. Vodafone Group Public Limited Company (NASDAQ:VOD)
Number of Hedge Fund Holders: 18
Vodafone Group Public Limited Company (NASDAQ:VOD) is a British multinational telecommunications corporation serving customers in Asia, Africa, Europe, and Oceania. The services at Vodafone Group Public Limited Company (NASDAQ:VOD) include fixed telephony, mobile telephony, broadband, digital television, and the internet of things.
Shares of Vodafone Group Public Limited Company (NASDAQ:VOD) rose 4% on January 31, 2022 on reports that Cevian Capital, a Swedish investment firm backed by American billionaire activist investor Carl Icahn, has built a significant but undisclosed stake in the company. Cevian has been pushing Vodafone Group Public Limited Company (NASDAQ:VOD) to make changes in its management and strategy to improve performance for the past few months. Reportedly, Andrew Millington, the head of UK equities at Abrdn, one of the top ten shareholders of Vodafone Group Public Limited Company (NASDAQ:VOD), supports Cevian Capital’s campaign. Millington stated that he would like to see the company pursue “in-market consolidation and potential strategic opportunities for its towers business”.
On November 23, Vodafone Group Public Limited Company (NASDAQ:VOD) declared a €0.045 per share semi-annual dividend, in line with previous. The dividend is payable on February 4, to shareholders of record on November 25.
After Bloomberg reported on January 28 that an activist Scandinavian fund has built a stake in Vodafone Group Public Limited Company (NASDAQ:VOD) and has been in dialogue with the company, Morgan Stanley analyst Emmet Kelly stated that he sees a “compelling valuation” scope for European Telco consolidation, and the potential for towers monetization as reasons why Vodafone Group Public Limited Company (NASDAQ:VOD) shares could possibly prove attractive to an activist shareholder. Kelley maintains an Overweight rating and a price target of £185 on the shares.
According to Insider Monkey’s third quarter database, 18 hedge funds were bullish on Vodafone Group Public Limited Company (NASDAQ:VOD), with stakes totaling $613.7 million. Renaissance Technologies is the largest stakeholder of the company as of Q3 2021, with 28.5 million shares worth $441.5 million.
In addition to Kohl’s Corporation (NYSE:KSS), Peloton Interactive, Inc. (NASDAQ:PTON), and Exxon Mobil Corporation (NYSE:XOM), Vodafone Group Public Limited Company (NASDAQ:VOD) has gained the attention of activist investors.
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Disclosure: None. 10 Stocks Activist Investors are Buying is originally published on Insider Monkey.
