Like it or not, activist investing is here to stay for a very long time says Keith Meister, CEO of Corvex Capital. In a television interview on CNBC’s Squawk on the Street, Meister defended his style of investing, saying it’s not a fad and that shareholder activism is an important tool for unlocking value.
“Will activism change over the next several years? Of course it will, but the general concept of value investors having ideas, partnering with companies, expressing ideas and helping to create value; I don’t think that is a fad. I think that’s a multi-decade thing,” Meister said.
Meister also disputed that activist investing can be inherently confrontational. While his firm doesn’t apologize for expressing its opinions or protecting its investments, Corvex does do its best to avoid fights. Meister noted that the firm only waged one proxy contest in the 13 times it exercised its voting power during the last four years.
Meister is one of the top activist investors, with his firm outperforming many of its peers. According to the Wall Street Journal, Meister was the right-hand man for activist Carl Icahn and was Chief Executive Officer for Icahn Enterprises from 2003 to 2006. In late 2010, Meister founded Corvex Management with about a $1 billion bankroll from George Soros. Meister has been Corvex’s Managing Director and Managing Partner ever since.
Following activist investors like Keith Meister is important because activism is a very specific and focused strategy in which the investor can somewhat control their own destiny. Instead of waiting for a catalyst of some sort, the activist investor can adroitly push for change at invested companies through negotiations with management and the company’s board and realize gains should the target company make the proposed changes. In recent years, the average returns of activist hedge funds have been much higher than the returns of an average hedge fund. We believe retail investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. Soon, we’ll be releasing a new quarterly newsletter written by former activist hedge fund analyst Michael Bland that tracks 10 or so activist campaigns at any given time.
Let’s look at Keith Meister’s stock picks. Meister’s 29 stock selections with a market cap of $1 billion had weighted average returns of 8.6% for the first quarter of 2015, blowing away the S&P 500 ETF (SPY) which came in at 0.9% for the same period. The firm’s top holding according to its latest 13F filing is Williams Companies Inc (NYSE:WMB), one of the most stable dividend stocks. Corvex is also the top shareholder in the stock among the funds we track, with the next largest position being held by Eric Mandelblatt’s Soroban Capital Partners, holding about half the stock of what Corvex disclosed. Williams Companies Inc (NYSE:WMB) is an energy infrastructure company operating in North America. As of the end of 2014, Corvex held 41.68 million shares valued at $1.87 billion, which represented just under 23% of its equity portfolio. Williams Companies Inc (NYSE:WMB)’s stock returned 23% for the first quarter of 2015.
Fidelity National Financial Inc (NYSE:FNF) is Corvex’s third largest holding according to the 13F filing. The company provides title insurance, technology, and transaction services to the real estate industry. At the beginning of 2015 the firm held 20.24 million shares of Fidelity National Financial Inc (NYSE:FNF) with a value of $697.32 million and representing an 8.5% position in the portfolio. Again Corvex is the largest shareholder in Fidelity National Financial Inc (NYSE:FNF) among the firms we track, with Larry Robbin’s Glenview Capital coming in at a very distant second with 11.16 million shares at a value of $384.39 million. Shares rose 7.2% for the first quarter.
Lamar Advertising Co (NASDAQ:LAMR) is a U.S.-based company engaged primarily in outdoor advertising, mainly billboards and posters. With a market-cap of about $5.7 billion, Lamar is one of the largest advertising agencies in the U.S. Investors are bullish on Lamar Advertising Co (NASDAQ:LAMR)’s ability to grow its digital platform and transform into a REIT. Recently Christian Leone’s Luxor Capital Group raised its stake in Lamar Advertising Co (NASDAQ:LAMR), but Keith Meister’s Corvex Capital is still the biggest shareholder among the funds we track. As of the latest filing, Corvex held 6.30 million shares with a value of $338.02 million. Meister increased the position by 61% compared to the previous filing. For the first quarter of 2015, Lamar’s stock rose almost 12%.
B/E Aerospace Inc (NASDAQ:BEAV) is a manufacturer of cabin interior products for commercial aircraft and business jets, and an aftermarket distributor and value-added service provider of aerospace fasteners. B/E Aerospace Inc (NASDAQ:BEAV) is a $6.66 billion market cap company and represented Corvex Capital’s most bullish move during the fourth quarter. The fund added 5.76 million shares to its position during the quarter, a 758% increase, with the increased holding now standing at 6.86 million shares and being valued at $398.13 million. B/E Aerospace Inc (NASDAQ:BEAV) was also the top pick of John Orrico’s Water Island Capital. Shares rose 10% during the first quarter of this year.
Corvex’s performance would have been better in the first quarter of 2015 had it not been for Meister’s position in Monsanto Company (NYSE:MON). Corvex held some 2.42 million shares, which had a value of $289.58 million at the beginning of the year. Monsanto Company (NYSE:MON)’s management still believes the controversial agricultural company can double its earnings per share by 2019. Among the billionaires that we track, six had investments totaling $1.69 billion in Monsanto Company (NYSE:MON) at the end of 2014. D E Shaw, the fund founded by billionaire David E. Shaw was one such investor, as was billionaire Larry Robbins’ Glenview Capital.
Disclosure: None
