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.