5 Stocks That Backers of the Activist Lobbying Arm CIRCA Like

There’s no doubt that activist investors have created a lot of value and helped millions of small investors to reap benefits through their activism. However, despite the successes they have had and the value they have created, they still continue to receive a lot of flak from companies, analysts, and even regulators because of their actions. To combat that, a consortium of activist investors created a lobbying arm last month dubbed The Council for Investor Rights and Corporate Accountability (CIRCA), which will promote the benefits of shareholder activism. Although the names of the activist investors that formed this trade association are not officially known yet, after talking to a person with knowledge of this newly-created entity, Reuters revealed last month that some of its backers include legendary activist investor Carl Icahn, Pershing Square’s founder Bill Ackman, Elliott Management’s founder Paul Singer, Barry Rosenstein of JANA Partners, and billionaire Dan Loeb of Third Point. In this article, we will take a look at five stocks that at least two of these famous activist investors liked heading into the second quarter and will also discuss how popular these stocks were among the 765+ hedge funds tracked by Insider Monkey.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 Platform Specialty Products Corp (NYSE:PAH)

 – Investors with long positions (as of March 31): 22

 – Aggregate value of investors’ holdings (as of March 31): $811.46 million

The ownership of Platform Specialty Products Corp (NYSE:PAH) among the funds in our database inched up by two during the first quarter, though the aggregate value of their Platform Specialty Products holdings fell by 16.4% during that time. Though it didn’t make any changes to its stake during the first quarter, Pershing Square continued to remain the largest shareholder of Platform Specialty Products Corp (NYSE:PAH) in our database at the end of the quarter, with ownership of 42.73 million shares of the company. The specialty chemicals company, founded with financial backing from Mr. Ackman, has lost two-thirds of its market capitalization in the past year and is currently trading at a price lower than that which it started trading at on the NYSE in January, 2014 following its delisting from the London Stock Exchange. For the first quarter, Platform Specialty Products Corp reported EPS of $0.11 on revenue of $824 million, topping analysts’ expectations of EPS of $0.10 on revenue of $799.69 million.

#4 Herbalife Ltd. (NYSE:HLF)

 – Investors with long positions (as of March 31): 37

 – Aggregate value of investors’ holdings (as of March 31): $2.72 billion

Moving on, Herbalife Ltd. (NYSE:HLF) has been one of the most popular stocks among activist investors for quite some time. While Pershing Square’s Bill Ackman has been relentless in his fight against the company since 2012, building and scaling down his short position during that period, Mr. Icahn has showed his conviction in the stock by holding on to his stake in the company for several quarters. At the end of March, Mr. Icahn continued to own 17.00 million shares of Herbalife Ltd. (NYSE:HLF). Shares of the nutrition company spiked in late-February after it reported better than expected fourth quarter results, and are trading up by 12.55% year-to-date. For its most recent quarter, Herbalife reported EPS of $1.36 on revenue of $1.12 billion, which represented declines from the EPS of $1.29 on revenue of $1.29 billion that it pulled in for the same quarter of last year. During the first quarter, the overall number of investors in our database with long positions in the stock increased by six and the aggregate value of their holdings in it increased by $929 million.

We’ll check out three more stocks on the next page which are favored by at least two of the aforementioned activist investors.

#3 TransDigm Group Incorporated (NYSE:TDG)

 – Investors with long positions (as of March 31): 45

 – Aggregate value of investors’ holdings (as of March 31): $3.32 billion

Amid a 3.5% drop in TransDigm Group Incorporated (NYSE:TDG)’s stock during the first quarter, a net total of ten hedge funds in our database left the stock, while the aggregate value of their holdings in it fell by $774 million. However, Third Point initiated a stake in TransDigm Group Incorporated (NYSE:TDG) during that period, purchasing 1.00 million shares of the company. The aircraft component manufacturer became a part of the S&P 500 on June, replacing Baxalta, which was recently acquired by Shire PLC (ADR) (NASDAQ:SHPG). TransDigm Group’s stock has seen a stellar rally in the past few weeks, following the company reporting its first quarter results. While the Street had estimated EPS of $2.58 on revenue of $777.11 million for the quarter, TransDigm Group managed to soundly beat those estimates, declaring EPS of $2.86 on revenue of $796.80 million. Shares of the company are currently trading up by 13.58% year-to-date.

#2 Gaming and Leisure Properties Inc (NASDAQ:GLPI)

 – Investors with long positions (as of March 31): 59

 – Aggregate value of investors’ holdings (as of March 31): $1.32 billion

Gaming and Leisure Properties Inc (NASDAQ:GLPI) saw a remarkable increase in its popularity among hedge funds during the first quarter, with net ownership increasing by 30 and the aggregate value of their holdings in it swelling by over 47%. Michael Novogratz’s Fortress Investment Group, which initiated an activist stake in the company during the final quarter of 2013, continued to remain the largest shareholder of Gaming and Leisure Properties Inc (NASDAQ:GLPI) among the funds covered by Insider Monkey as of March 31, owning 10.5 million shares of the company. Shares of the Pennsylvania-based real estate investment trust have appreciated by 21.61% so far in 2016, but despite that rally, still sport an attractive annual dividend yield of 6.63%. On June 10, analysts at Wells Fargo reiterated their ‘Buy’ rating on the stock.

#1 American International Group Inc (NYSE:AIG)

 – Investors with long positions (as of March 31): 94

 – Aggregate value of investors’ holdings (as of March 31): $8.4 billion

The consistent underperformance of American International Group Inc (NYSE:AIG) in comparison to other financial companies led several activist investors to initiate a position or increase their stake in the company last year. The most prominent among them was Mr. Icahn, who boosted his holding in the insurer by 3,004% in the fourth quarter of 2015 and upped it by a further 6% in the first quarter, to 44.24 million shares. Earlier this year, AIG reached a settlement with a group of activist investors by agreeing to nominate John Paulson of Paulson & Co. and Samuel J. Merksamer, Managing Director of Icahn Capital LP, to its board at its 2016 shareholders meeting. A regulatory filing by AIG at the end of March revealed that the salary of the company’s CEO was reduced by 29% as it missed its profit target and also stopped using credit default swaps as a metric to determine its CEO’s pay, which most analysts think was done at the behest of activist investors.

Disclosure: None