We recently compiled a list of the 10 Stocks Targeted by Activist Investors Right Now. In this article, we are going to take a look at where Texas Instruments Incorporated (NASDAQ:TXN) stands against the other stocks targeted by activist investors.
Activist investors play an important role in deploying various strategies to try and unlock value in stocks they believe are trading below their fair value. By paying millions and even billions of dollars to buy stakes in companies, they accrue significant power and the right to lobby for changes they believe will help bolster share price and shareholder value. Therefore, it does not come as a surprise that the top 10 stocks targeted by activist investors right now have also seen their leadership targeted as one of the ways of engineering changes to unlock value.
Last year alone, companies faced a record number of activist campaigns as shareholders tried to insert optimum pressure to oust directors of companies struggling amid deteriorating macro conditions. Some activist investors went to the extent of pushing for the sale of businesses whose shares had tumbled significantly.
Consequently, there were 252 activist campaigns globally in 2023, a 7% increase from the previous year. The fact that the top 10 stocks targeted by activist investors now also include blue-chip businesses underlines that no one is safe from scrutiny.
The significant increase in activist campaigns came from geopolitical instability and economic uncertainty. Nevertheless, activist investors shrugged off these concerns as they showed their resilience in pushing for corporate changes and operational efficiency in the race to unlock shareholder value.
Similarly, investors closely watch activist investors’ moves in the market as they help shed light on some of the best-undervalued opportunities worth exploring. A report of 550 activist campaigns has already shown that activist investors often outperform the overall market by 6.3% through their campaigns. The report by Álvaro & Marshal clearly shows why it is essential to closely watch activist investors’ moves when trying to uncover high-risk reward opportunities in the market.
Additionally, activist campaigns focused on operational demands to change how companies operate to generate value often outperform the market by 9.4% on average. The outperformance stems from activist investors installing their preferred directors on the board of directors to try and influence how a company operates in its push to unlock shareholder value.
One trend that is becoming increasingly clear is that activist campaigns are becoming increasingly regional and dynamic. With the US equities outperforming the overall market over the past few years, activist investors are increasingly targeting stocks in other underperforming regions. Consequently, the activist investors launched 69 campaigns in Europe last year, focusing on pushing for mergers and acquisitions. Equities in Asia Pacific were not spared either, going by the 44 new campaigns.
While the UK recorded a 71% increase in activist campaigns to 29 campaigns and the US recorded a 20% drop to 109 campaigns in 2024, Canada saw a 171% increase in shareholder activism to 19 campaigns. Nevertheless, US-based activist investors continue to account for the most significant share of global activist campaigns. For instance, three of the busiest US-based activist investors launched 14% of the worldwide activist campaigns.
Over the years, activist campaigns have been dominated by high-profile hedge funds, including Icahn Enterprises, Jana Partners and Trian Partners. Elliott Investment Management is one activist hedge fund that stands out when it comes to unlocking value in under two years.
The trend is slowly changing, with new, more aggressive funds pushing to make their mark. For instance, more than 40% of campaigns last year were spearheaded by hedge funds for the first time, especially in Europe. The change of guard stems from the barrier of entry being lowered, giving shareholders the ability to launch more campaigns.
It is one of the best times to watch the 10 stocks targeted by activist Investors right now, as the campaigns are highly successful. The double-digit returns posted by activist investors in 2023 in one of the most challenging environments amid the high interest rates underscores the effectiveness of some campaigns.
For instance, activist investors who pushed for management changes and the streamlining of operations enjoyed an average return of 20.2% in 2023, a significant improvement from an average loss of 16% in 2022. Even as the S&P 500 gained 24%, activist investors like Mason Morfit’s ValueAct Capital came out on top, posting a 39% return, while Bill Ackman’s Pershing Square holdings delivered a 27% gain. Healthcare-focused hedge fund Caligan Partners posted a 37% gain as Engaged Capital topped the S&P 500 gain with a 29% gain.
The activist campaigns were mainly helped by a rising stock market and focused on some of the most prominent stock picks on a roll, like Nvidia for AI and cloud computing powerhouse Salesforce. The campaigns also turned out to be a great success for the activist investors pushing for cost cuts, strategic alternatives, and management changes to navigate the high interest rate environment.
In the first half of 2024, activist investors launched a record number of campaigns, 147 of which topped the previous 143 set in 2018. In the second quarter, they launched 86 campaigns, with Elliott Capital emerging as the busiest, launching 11 campaigns and investing $11 billion in the capital in a bid to enhance its influence in its targets
The surge in activist campaigns in 2024 threatens to trigger costly boardroom battles as the activist investor pushes for management changes, spin-offs, and outright sales.
Our Methodology
A closer look at how shareholders push for optimum value shows that activist investors are not planning to go slow anytime soon. Instead, they are ready to push companies harder for changes, including accelerating board changes to unlock value. Consequently, we have compiled a list of the most recent activist campaigns and ranked them based on their recent market capitalization. At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A robotic arm in the process of assembling a complex circuit board – showing the industrial scale the company operates at.
Elliott Management at the Texas Instruments Incorporated (NASDAQ:TXN)
Market Cap: $182.27 Billion
Trian Partners’ Equity Stake: $2.5 Billion
Texas Instruments Incorporated (NASDAQ:TXN) is one of the 10 Stocks targeted by activist investor Elliott Investment Management, a $2.5 billion stake in the semiconductor giant. The activist investor has taken issue with Texas Instruments Incorporated (NASDAQ:TXN) for lagging the overall stock market returns at a time when chip companies are flying high amid an AI frenzy.
The activist investor has also taken issue with the comments that they spend too much on massive capital projects instead of capital discipline to restore investors’ value. The activist hedge fund wants Texas Instruments Incorporated (NASDAQ:TXN) to use a capacity management strategy and introduce a free cash flow per share target.
Overall TXN ranks 1st on our list of the stocks targeted by activist investors right now. You can visit 10 Stocks Targeted by Activist Investors Right Now to see the other stocks that are on hedge funds’ radar. While we acknowledge the potential of TXN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TXN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Countries with the Highest Purchasing Power Parity in the World in 2024 and 10 Very High Yield Dividend Stocks With Upside Potential.
Disclosure: None. This article is originally published at Insider Monkey.