Q&A: Activist Interview

Editor's Note: The following is an excerpt available exclusively at TheStreet.com from an interview originally published by Value Investor Insight.

The epiphany came to Jeffrey Ubben while managing the then $5 billion Fidelity Value Fund in the mid-1990s: "I just didn't know what I owned. With so much new money coming in, I was constantly adding to 150 positions, which to me was a recipe for mediocrity."

Since leaving Fidelity to join merchant bank Blum Capital and then starting ValueAct Capital in 2000, Ubben's results have been anything but mediocre. By making large bets and working with management and boards to increase shareholder value, ValueAct has returned an annual 18.1% net of fees over the past five years, vs. 6.3% for the Russell 2000.

Value Investor Insight: How does your brand of shareholder activism differ from what you see out there today?

Jeffrey Ubben: Much of what you see today is "buy shares today and tomorrow throw a hissy fit." The focus is on shortening time horizons by being your own catalyst.

That's a problem for me, because that style is transparent and could discredit all activists. Boards can say activists are just worried about making their quarterly or monthly performance numbers, and there's something to that, frankly. Writing a nasty letter is going to lose the pop it has now - the activism is going to have to have more integrity than that.

Our idea of activism is to get really involved and help new or current management lead the business and extend the run of a successful investment. The more of our portfolio we can have in great assets with great management where we're helping control the capital decisions - that's nirvana.

How did your investment in Acxiom (ACXM Quote - Cramer on ACXM - Stock Picks) evolve -- or devolve -- into your making a $25 per share offer for the entire company?

We went to them in 2003 with a plan to realize equity value by getting out of the high-growth game and focusing on growing with their customers at 7%-10% per year while emphasizing free cash flow and returns on assets. They responded initially and the stock went up quickly from $16 to $25. We took money off the table at the end of 2004, because we generally like to sell 85-cent dollars to recycle money back into 50-cent dollars.

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