This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Does It Pay to Mimic Carl Icahn's Moves?

NEW YORK ( TheStreet) -- Being an activist investor is a hard way to make a living. The typical practitioner first spots a company that is performing badly because of management mistakes. Then the activist buys a big stake in the stock and begins pushing for changes. Activists may advocate raising the dividend or replacing the CEO.

When an activist succeeds, the profits can be huge. Among those who have made fortunes by shaking up corporate boards are Carl Icahn, Nelson Peltz and Bill Ackman.

Should you invest in stocks that are targeted by activists? Not necessarily, says Ken Squire, portfolio manager of 13D Activist (DDDAX), a mutual fund. While some of the top activist investors have strong long-term track records, many other players deliver subpar results.

To separate the stars from the also-rans, Squire tracks all of the approximately 1,500 13D documents that are filed at the Securities and Exchange Commission each year. Investors must make a filing when they have acquired more than 5% of a company's shares. Squire monitors each deal, assessing the obstacles that activists face. He analyzes investment track records, determining whether an activist excels in particular industries or types of deal. Squire sells the data to activists and institutional investors.

In December 2011, he opened the activist mutual fund, which invests in 20 or so stocks that have been involved in 13D filings. The fund aims to outperform the S&P 500. Just as important, Squire seeks to provide diversification because activists can push up stock prices during weak markets. So far the approach has been succeeding. In 2012, the fund returned 21%, outpacing the S&P 500 by 5 percentage points. During the fourth quarter of the last year, the portfolio returned 5.2%, while the S&P 500 sank slightly into the red.

One of Squire's favorite holdings is Agrium (AGU - Get Report), which operates two businesses: a retail operation that sells fertilizers and a wholesale business that distributes potash and other crop nutrients. JANA Partners, an activist hedge fund, holds 6% of the shares and has argued that the company should be split in two so that each major line could be operated separately. The activists are seeking board seats, calling for cutting costs and strengthening the company's working capital.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AGU $104.09 0.00%
DIN $105.87 0.00%
HHC $153.71 0.00%
AAPL $124.25 0.00%
FB $81.66 0.00%

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs