In this article, we’re going to take a look at 10 biggest stocks targeted by activist investors right now.
Activist investing seems to be on the rise, with the number of campaigns up by 7% in the year at 252, according to Lazard. Region-wise, a record-breaking number of campaigns was registered in Europe, 69, followed by 44 campaigns waged by activist investors in the Asia-Pacific region.
Interestingly enough, last year we saw some of the biggest companies being targeted by activist investors. Even tech behemoth Alphabet Inc (NASDAQ:GOOGL) was not spared, as billionaire Chris Hohn, the founder of TCI Fund Management, issued a letter in January 2023, requesting job cuts. In the letter, Hohn, whose fund holds a $6 billion position in Alphabet Inc (NASDAQ:GOOGL), said that the company needed to cut 20% of its workforce to bring back the employment levels to those in 2021.
Paul Singer of Elliott Management
Many other large-cap companies came on the radars of activist investors, with some companies targeted by several activists at once. Salesforce Inc (NYSE:CRM) saw a swarm of five activists surrounding it. More specifically, Dan Loeb‘s Third Point, Mason Morfit-led ValueAct Capital, Jeff Ubben‘s Inclusive Capital, Paul Singer‘s Elliott Management, and Jeffrey Smith‘s Starboard Value, approached Salesforce Inc (NYSE:CRM) over the first half of 2023, as the company’s stock was dwindling. Activists pushed Salesforce Inc’s management for changes and they succeeded, as the stock recovered following some overhauls.
Overall, activists seem to be more eager to go after larger companies. SquareWell Partners estimated that between January 2022 and June 2023, activist campaigns targeted 13 large-cap companies, which represents a substantial increase from four companies in the previous two years. This trend might persist this year as well, as our research of largest companies that have been targeted by activist investors in recent weeks already shows eight companies with a market cap above $10 billion, and the top 5 biggest stocks targeted by activists are companies with a market cap above $50 billion.
Activist investors are a very interesting group to follow when looking for stock picks. These investors usually take a position in companies and engage directly with their boards and management seeking changes to unlock shareholder value. This can involve anything from management changes and cost cuts to splitting the targeted company and the outright sale of the entire business.
But why is shareholder activism on the rise lately? Well, there are several reasons that can be highlighted. One is the cooldown of the global economy. Even though it seems the US economy might actually succeed to “soft land” as many experts predict, the economic growth still looks tepid and, other countries (see Germany) are heading towards a recession. In turn this means that companies are looking at slower revenue growth and more narrow bottom lines. According to FactSet, the blended annual earnings growth rate for the fourth quarter of 2023 is 1.6%, which is significantly lower than the 5-year average growth of 9.5%. This is based on data from S&P 500 companies that either reported their actual results by February 2 (around 46% of the companies) and estimates for companies that were yet to report their results.
In this environment, it’s understandable why activist investors are seeking for companies to take some actions to improve profitability. The aforementioned Alphabet Inc and Salesforce Inc became targets of activist investors who demanded exactly that. Chris Hohn requested Google parent company Alphabet Inc to cut 20% of its workforce, but also said that the company needs to “address excessive employee compensation,” pointing out that the median salary in 2021 was $300,000. Regarding Salesforce Inc, one of the activists, Starboard Value, reportedly expressed displeasure at the company’s expenses. Moreover, reports allege that many investors (potentially including activists) are disappointed about the integration of the workplace messaging app Slack, which was acquired in 2021 for nearly $28 billion, and might be questioning whether it needs to be sold.
Another reason behind the growth of shareholder activism is the ascend of the so-called ESG investing. ESG, which stands for Environmental, Social, and Governance, is a fairly new trend, where investors buy shares of the company not just because of the company’s value, but also because the company scores high on the ESG metrics. According to a survey conducted by deVere Group, 56% of polled investors, plan to increase their ESG-focused holdings this year. Amid this trend, some activist investors have positioned themselves as ESG-focused. For example, Jeff Ubben has left ValueAct and launched Inclusive Fund, a firm focused entirely on sustainable businesses. As you will see later on in our breakdown of biggest stocks targeted by activist investors, some companies made our list because they got on the radars of ESG investors.
Paul Singer of Elliott Management
Our Methodology
To identify the biggest stocks targeted by activist investors right now, we looked for companies that made the headlines in the context of renowned activist investors taking a position in the company in the recent weeks, or companies that were covered in the news in the context of recent activist campaign updates. We then ranked these companies based on their latest market capitalization.
10. Etsy Inc (NASDAQ:ETSY)
Market Cap: $8.57 billion
Etsy Inc (NASDAQ:ETSY)’s stock has been underperforming lately, dropping by 30% over the last year. During the fourth-quarter earnings call, the company’s CEO Josh Silverman highlighted macroeconomic headwinds as impacting the company, but also adding that their belief is that this is a temporary situation.
“But this is a time when I think products that are not the cheapest possible are out of favor. And I don’t think that’s forever. When I imagine, going forward, does everyone always wants the cheapest version of any given product? No, absolutely not. I think that that trend, this is a cycle, we’re in a moment in the cycle, and I think we’ll move to better moments in the cycle, hopefully, soon,” Silverman said.
In the meantime, Etsy Inc found itself in the cross-hairs of activist investor Paul Singer, whose fund Elliott Management owns 1.90 million shares as of the end of December. Not only did Elliott acquire a position in the company, but as of the beginning of February, the investor also obtained board representation. Marc Steinberg, an Elliott partner, upon joining the board, said in a press release that he believes that Etsy provides an opportunity for value creation and he will be working with the board and management to improve customer experience, accelerate growth and drive value over the long run.
At the end of December, there were 32 funds in our database bullish on Etsy Inc, unchanged over the quarter. Among these funds, the top shareholder is Brian Bares’ Bares Capital Management, which holds 4.08 million shares.
9. Match Group Inc (NASDAQ:MTCH)
Market Cap: $9.09 billion
In addition to adding Etsy Inc to its equity portfolio during the fourth quarter, Elliott Management also acquired a position in Match Group Inc (NASDAQ:MTCH), a company that owns dating platform Tinder. In its latest 13F filing, Elliott reported holding 3.0 million shares of Match Group Inc, although reports in January indicated that Elliott’s stake could be as high as 9.5% of the company. However, Elliott has not yet announced any plans regarding its investment in the company.
Match Group Inc’s stock has been losing ground, having declined by 80% since 2021. For the fourth quarter, the company posted EPS of $1.08 and its revenue of $866.23 million, an increase of 10.19% on the year. During the earnings call, CEO Bernard Kim said that in 2024, Match Group Inc plans to leverage AI to enhance the user experience for its Tinder platform.
8. Twilio Inc (NYSE:TWLO)
Market Cap: $11.26 billion
During the fourth quarter, Dallas-based Anson Fund acquired a fairly small position in cloud communications company Twilio Inc (NYSE:TWLO), having reported ownership of 440,540 shares plus Call options, in its latest 13F filing. Nevertheless, the fund took an activist stance towards the company and has already claimed a victory. In January, Twilio Inc CEO Jeff Lawson stepped down and resigned from the Board of Directors. Anson Funds, together with Legion Capital, which holds 601,050 shares, as of the end of December, have been pressuring company for over a year to divest assets in order to boost shareholder value, according to reports.
Twilio Inc’s stock slid by more than 80% over the last three years amid disappointing performance and currently represents one of the best beaten-down stocks to buy right now. During the fourth-quarter earnings call, CEO Khozema Shipchandler pointed out that its Twilio Segment business continued to underperform and the company had been conducting an operational review of the segment. When asked whether the conclusion of the review might result in a sale of the segment, Shipchandler said that they are approaching the review “with an open mind.”
At the end of December, there were 47 funds tracked by Insider Monkey bullish on Twilio Inc, up by four funds over the quarter. Among these investors, David Blood And Al Gore’s Generation Investment Management is the top shareholder with a stake comprising 8.50 million shares.
7. Trimble Inc (NASDAQ:TRMB)
Market Cap: $15.50 billion
Next in our list of biggest stocks targeted by activist investors is Trimble Inc (NASDAQ:TRMB), a $15.5 billion a technology company that supports a number of industries, including construction, agriculture, natural resources, and utilities. In December, Trimble Inc got in the cross-hairs of activist investor Barry Rosenstein, whose fund Jana Partners acquired a new position containing 3.76 million shares during the fourth quarter. When disclosing the position, Jana Partners said they would request the company to halt acquisitions and focus on organic growth and improving margins. In January, Trimble Inc announced a buyback worth $800 million and added two new board members.
At the end of December, there were 29 funds with long positions in Trimble Inc, up by three over the quarter. Besides Jana Partners, other funds bullish on the company include Generation Investment Management and Robert Joseph Caruso’s Select Equity Group, which own 12.27 million shares and 6.24 million shares, respectively.
6. Illumina, Inc. (NASDAQ:ILMN)
Market Cap: $21.52 billion
Illumina, Inc. (NASDAQ:ILNM) saw 58 funds from our database holding its shares as of the end of December. One of these investors is Carl Icahn‘s Icahn Capital, which owns 430,000 shares, according to its latest 13F filing. Another activist investor that acquired shares of Illumina, Inc. (NASDAQ:ILMN) is Keith Meister’s Corvex Capital, which holds 730,084 shares. Icahn has been after Illumina, Inc. for awhile, but in December, the investor said it planned to oust the board. Previously, the activist had been criticizing the acquisition of cancer test maker Grail and in December Illumina, Inc. announced plans to divest Grail.
Nevertheless, in his open letter to shareholders, Icahn said:
“We have major misgivings that as long as this current board remains in power, even if there is a divestiture, it will come with far too many strings attached. Why should stockholders trust the legacy conflicted directors with the GRAIL divesture process? Our third goal is to remove these legacy conflicted directors.”
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5. Norfolk Southern Corp (NYSE:NSC)
Market Cap: $58.63 billion
Norfolk Southern Corp (NYSE:NSC), which has a market cap of $58.63 billion, is one of the largest railway companies in the US. One of the company’s shareholders is Ancora Advisors, led by Frederick DiSanto, which holds 357,197 shares of the company, as of the end of 2023. However, Ancora has also been engaged in a rather fierce proxy fight with Norfolk Southern Corp. The investor has been pushing for the removal of CEO, as well as the rest of the management team and the board of directors. Ancora has reaffirmed its position in a recent statement issued following a derailment in Lower Saucon Township. However, Norfolk Southern Corp has been fighting back, saying that the CEO has the full support of the current board and that the company has been more focused on safety.
During the fourth quarter, Norfolk Southern Corp saw the number of bullish investors among those tracked by Insider Monkey increase to 50 from 44. These funds include Ken Fisher’s Fisher Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Israel Englander’s Millennium Management.
4. BP plc (NYSE:BP)
Market Cap: $102.72 billion
When it comes to oil & gas companies, we often see ESG-focused investors pushing for production cuts and more focus on environment. However, sometimes activists can target energy companies for what we might believe to be the wrong reasons. London-based hedge fund Bluebell has recently acquired a stake in BP plc (NYSE:BP). According to reports, Bluebell has been pushing the energy company to increase production of oil & gas and cut its commitments towards clean energy. The investor believes that BP plc (NYSE:BP)’s plans to cut production by 25% by 2030 harms shareholder value.
At the end of 2023, there were 40 funds in our database bullish on BP plc (NYSE:BP), including Fisher Asset Management and Two Sigma Advisors, which hold 841,211 shares and 761,900 shares, respectively.
3. Walt Disney Co (NYSE:DIS)
Market Cap: $202.36 billion
Among energy companies that make up our list of 5 biggest stocks targeted by activists investors right now, Walt Disney Co (NYSE:DIS) looks like an outlier, although the market cap of $202.36 billion suggests otherwise. Walt Disney Co is currently engaged in a fierce proxy battle with activist investor Nelson Peltz, which reportedly has been going on for years. Nelson Peltz’s Trian Partners holds a $2.9 billion stake in Walt Disney Co and the investor has been attempting to obtain a board seat for years, according to reports. Both parties have been going at each other with statements and videos full of criticisms and asking for shareholders’ support at the upcoming annual meeting.
Earlier in March, Nelson Peltz published a white paper outlining his view on Walt Disney Co’s course of action. Among other things, the investor believes that Disney should be making fewer sequels, allocate funds towards less-expensive content that would balance out the higher-cost franchises. Peltz also believes the company should “issue long-term free cash flow growth target beyond FY 2024 to anchor investors on a clear strategic vision and enhance accountability.”
Walt Disney Co saw 89 funds in our database holding shares as of the end of December, unchanged over the quarter.
2. Shell PLC (NYSE:SHEL)
Market Cap: 204.04 billion
Then there’s Shell PLC (NYSE:SHEL), which saw 46 funds in our database holding shares as of the end of the year. Recently, a coalition of investors, which collectively own roughly 5% of the company, have been pushing for a closer alignment towards emissions reduction targets. The campaign started when Dutch shareholder activist Follow This issued a resolution that is currently backed by more than 25 investors, including one of the largest pension funds in the UK, National Employment Savings Trust. Shareholders are expected to cast their votes on the resolution in May.
Among the funds in our database, the top shareholder of Shell PLC is Ken Fisher’s Fisher Asset Management, which owns 22.82 million shares as of the end of 2023.
1. Exxon Mobil Corp (NYSE:XOM)
Market Cap: $430.03 billion
Last but not least, our list of biggest stocks targeted by activists investors right now is led by Exxon Mobil Corp (NYSE:XOM), in which there were 85 funds holding shares as of the end of December, versus 79 funds a quarter earlier.
Similar to Shell PLC, Exxon Mobil Corp got in the cross-hairs of activist investor Follow This, which urged to company to increase the rate of emissions cuts. Instead of allowing the vote on the resolution to proceed, Exxon Mobil Corp filed a lawsuit to block the resolution from being voted on at the upcoming annual meeting. Even though Follow This and its US backer Arjuna Capital have recently withdrawn the resolution, Exxon Mobil Corp is proceeding with the lawsuit. This might be concerning, as it could potentially inspire other companies to block resolutions in court.
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