15 Stocks Targeted By Activist Hedge Funds

11. Southwest Airlines Co. (NYSE:LUV)

Company Market Cap as of December 31: $20.16 Billion

Number of Hedge Fund Holders: 36

Southwest Airlines Co. (NYSE:LUV) is a passenger airline company that provides scheduled air transportation services. It is one of the stocks targeted by activist hedge funds as it tried to bounce back from the slowdown triggered by the Covid-19 pandemic. The US airline giant has been under pressure from activist investor Elliott Management, pushing for management and other strategic changes.

Blaming the airline for its poor performance, Elliott Investment Management started a campaign to remove CEO Bob Jordan and replace two-thirds of Southwest’s board of directors. Southwest Airlines Co. (NYSE:LUV) responded by unveiling several measures that it hopes will reinvigorate growth prospects amid soaring activist pressure.

Part of the changes that the airline has been working on include the sale of vacation packages and leased back transactions of aircraft to boost investor confidence. Additionally, Southwest Airlines Co. (NYSE:LUV) declared that it was moving away from open seating and toward assigned seats, a major recommendation made in a 51-page presentation to the airline’s board by Elliott Investment Management.

By 2027, Southwest Airlines Co. (NYSE:LUV) anticipates the actions will result in an additional $4 billion in earnings before interest and taxes (EBIT). In three years, it anticipates generating over $1 billion in free cash flow, a minimum operating margin of 10%, and a 15% return on its capital investment. The airline also announced a new share buyback program worth $2.5 billion.