In this article, we discuss 10 stocks that activist investors are buying.
2021 was a successful year for activist investors like Starboard Value and Carl Icahn, who pushed for significant changes in multiple prominent companies. In 2021, activist investors launched 89 campaigns which pushed for better shareholder outcomes, higher wages, sustainable operations, and improved performance. Due to COVID-19, activism in 2020 and 2021 remained below pre-Covid years, with 102 campaigns in 2019 and 113 in 2018. However, analysts believe that the number of campaigns will increase once the pandemic-driven work from home mandates subside and the economy goes back to normal activity.
Heading into 2022, activist investors are likely to pursue companies with depressed stock prices and non-compliant ESG names. Activism will be on the rise since 2021 proved that waging successful campaigns despite owning less than 5% of a company’s common stock is possible. The most prominent example from 2021 of minority activist shareholders shaking up big industry names is Engine No 1, with a 0.02% ownership stake in Exxon Mobil Corporation (NYSE:XOM) and the backing of passive investors, pushing for the replacement of three board members with candidates who were focused on a green future and actively involved in climate initiatives.
British companies with over $500 billion market cap were also increasingly targeted by activist investors, with household names like Unilever PLC (NYSE:UL), Shell plc (NYSE:RDS-A), and GlaxoSmithKline plc (NYSE:GSK) making headlines when activist investors pushed for operational efficiency.
Some of the most notable stocks from activist investor portfolios include Kohl’s Corporation (NYSE:KSS), Peloton Interactive, Inc. (NASDAQ:PTON), and Exxon Mobil Corporation (NYSE:XOM).
Paul Singer of Elliott Management
Our Methodology
We selected the companies that made headlines in 2021 and so far in 2022 when activist investors pushed for significant changes in management and operations. We have ranked the list according to the hedge fund sentiment surrounding the stocks.
Stocks Activist Investors are Buying
10. Taylor Wimpey plc (LSE:TW.L)
Number of Hedge Fund Holders: N/A
Taylor Wimpey plc (LSE:TW.L) is a British home construction company that was founded in 2007, after the merger of rival construction firms, namely Taylor Woodrow and George Wimpey.
Taylor Wimpey plc (LSE:TW.L) was on the radar of the US activist investment firm, Elliott Management, founded by billionaire Paul Singer, who is known to launch activist movements against the Argentinian government, BHP Group Limited (NYSE:BHP), and GlaxoSmithKline plc (NYSE:GSK), to name a few.
In December 2021, Elliott Management wrote a public letter to Taylor Wimpey plc (LSE:TW.L)’s chair Irene Dorner, stating that it is one of the top five investors of the company, and demanded that the CEO be replaced and hired from outside the organization. The activist investor was openly critical of the existing management’s “operational and strategic missteps” and “failed large-sites strategy”, and demanded that someone with greater experience must be positioned as chief executive offer. As a result, the existing CEO Peter Redfern announced that he would resign in 2022, after 15 years of service at Taylor Wimpey plc (LSE:TW.L).
On January 20, Morgan Stanley analyst Christopher Fremantle lowered the price target on Taylor Wimpey plc (LSE:TW.L) to £190 from £195 and kept an Overweight rating on the shares.
Like Kohl’s Corporation (NYSE:KSS), Peloton Interactive, Inc. (NASDAQ:PTON), and Exxon Mobil Corporation (NYSE:XOM), activist shareholders are paying attention to Taylor Wimpey plc (LSE:TW.L).
9. SSE plc (LSE:SSE.L)
Number of Hedge Fund Holders: N/A
SSE plc (LSE:SSE.L) is a British company that generates electricity from water, gas, coal, oil, and multi fuel, and supplies electricity to the United Kingdom and Scotland, serving both residential and commercial customers. The company is also involved in renewable power initiatives.
HSBC analyst Verity Mitchell on January 18 downgraded SSE plc (LSE:SSE.L) to Hold from Buy with a price target of £1,740, down from £1,810.
Paul Singer’s Elliott Management Corporation has been making strides in the United Kingdom lately, and in 2021, the activist firm targeted SSE plc (LSE:SSE.L), pushing for a split of its renewable arm from its regular operations. Elliott Management held a stake just under 5% in SSE plc (LSE:SSE.L), hence it did not need to be publicly disclosed, but the activist firm was one of the top five investors of the company.
SSE plc (LSE:SSE.L) announced on September 20 that it had resisted Elliott’s months-long pursuit of a split. On November 17, the company announced higher green spending initiatives through 2026, worth £12.5 billion, to appease Elliott Management and close the discussions on a split of its renewable power segment. Under the new investment plan, SSE plc (LSE:SSE.L) hopes to expand its renewable power five-fold to 50 terawatt hours a year by 2031.
8. Toshiba Corporation (OTC:TOSYY)
Number of Hedge Fund Holders: N/A
Toshiba Corporation (OTC:TOSYY) is a Japanese company specializing in electronics and storage solutions, supplying its products to customers worldwide. Toshiba Corporation (OTC:TOSYY) is primarily recognized for its rechargeable lithium-ion batteries, computers, visual products, and home appliances.
Effissimo Capital Management, a Singapore-based activist investor, owns a 9.9% ownership stake in Toshiba Corporation (OTC:TOSYY), and is the largest stakeholder of the company. Toshiba Corporation (OTC:TOSYY)’s investor base consists 25% of activist shareholders, who sided with Effissimo to push for the Toshiba Corporation (OTC:TOSYY)’s split into three independent companies in March 2021, effectively separating the energy infrastructure and engineering, electronic devices and AI, and memory chipmaker businesses.
This petition to split was based on the grounds that Toshiba Corporation (OTC:TOSYY) had lost its sheen like many other conglomerates, and there needs to be a focused story for investors. The performance will also improve when the company is split, much like General Electric Company (NYSE:GE) and Siemens Aktiengesellschaft (OTC:SIEGY). The company announced on November 12 plans to go through with the split by the second half of 2023.
On January 5, the second largest stakeholder of Toshiba Corporation (OTC:TOSYY), namely 3D Investment Partners, contested the decision to split. With a 7.6% stake in Toshiba Corporation (OTC:TOSYY), 3D Investment Partners has called for an extraordinary annual general meeting so that shareholders can come together and vote directly against the split.
7. Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 17
Headquartered in London, Unilever PLC (NYSE:UL) is a multinational consumer goods company that supplies a wide range of products including food, condiments, wellbeing supplements, cleaning agents, pet food, beauty products, and personal care items. Unilever PLC (NYSE:UL) serves customers worldwide with a portfolio of more than 400 brands.
American billionaire and activist investor Nelson Peltz, via his hedge fund Trian Partners, has built a position in Unilever PLC (NYSE:UL) and is pushing for changes in the multinational giant. His stake in Unilever PLC (NYSE:UL) is unknown as of January 24, 2022. Peltz is known for demanding operational improvements in the consumer goods sector, and his most famous activist campaign to date has been against The Procter & Gamble Company (NYSE:PG) in 2018.
Unilever PLC (NYSE:UL) reported on January 24 that it plans to cut at least 1500 jobs at the regional and divisional level in an effort to make its organizational model simpler and more category-focused, since it will help speed up the decision making process at the company.
James Edward Jones, the managing director of consumer research at the Royal Bank of Canada stated on January 25 that Unilever PLC (NYSE:UL) should focus on reinvesting cost savings into its brands and work on company culture, since “all new segment heads are Unilever incumbents.”
On January 24, after it was reported that activist fund Trian Partners headed by Nelson Peltz has built a stake in Unilever PLC (NYSE:UL), Jefferies analyst Martin Deboo noted that similar activist interventions have been associated with a 5% on-the-day return on average and a 15% sector-relative return to the point of exit, stating that the Trian involvement is likely to be “materially positive” for Unilever PLC (NYSE:UL). The analyst thinks that Peltz is likely to argue for a Home & Personal Care versus Foods split, noting that he has “long been of the view” that the right path to unlock value is via a faster rate of disposals from Unilever PLC (NYSE:UL)’s slow-growing Foods businesses, or a separation via a sale or spin. He kept a Buy rating on Unilever PLC (NYSE:UL) shares with a £3,675 price target.
In Q3 2021, 17 hedge funds in the database of Insider Monkey were long Unilever PLC (NYSE:UL), with stakes equaling $876.6 million. Gardner Russo & Gardner held the largest stake in the company at the end of the third quarter, with 9.4 million shares worth $510.4 million.
Here is what Fundsmith Equity Fund has to say about Unilever PLC (NYSE:UL) in its Q4 2021 investor letter:
“Unilever seems to be laboring under the weight of a management which is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business. The most obvious manifestation of this is the public spat it has become embroiled in over the refusal to supply Ben & Jerry’s ice cream in the West Bank. However, we think there are far more ludicrous examples which illustrate the problem. A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert — salads and sandwiches). Although Unilever had by far the worst performance of our consumer staples stocks during the pandemic, we continue to hold the shares because we think that its strong brands and distribution will triumph in the end.”
6. Vodafone Group Public Limited Company (NASDAQ:VOD)
Number of Hedge Fund Holders: 18
Vodafone Group Public Limited Company (NASDAQ:VOD) is a British multinational telecommunications corporation serving customers in Asia, Africa, Europe, and Oceania. The services at Vodafone Group Public Limited Company (NASDAQ:VOD) include fixed telephony, mobile telephony, broadband, digital television, and the internet of things.
Shares of Vodafone Group Public Limited Company (NASDAQ:VOD) rose 4% on January 31, 2022 on reports that Cevian Capital, a Swedish investment firm backed by American billionaire activist investor Carl Icahn, has built a significant but undisclosed stake in the company. Cevian has been pushing Vodafone Group Public Limited Company (NASDAQ:VOD) to make changes in its management and strategy to improve performance for the past few months. Reportedly, Andrew Millington, the head of UK equities at Abrdn, one of the top ten shareholders of Vodafone Group Public Limited Company (NASDAQ:VOD), supports Cevian Capital’s campaign. Millington stated that he would like to see the company pursue “in-market consolidation and potential strategic opportunities for its towers business”.
On November 23, Vodafone Group Public Limited Company (NASDAQ:VOD) declared a €0.045 per share semi-annual dividend, in line with previous. The dividend is payable on February 4, to shareholders of record on November 25.
After Bloomberg reported on January 28 that an activist Scandinavian fund has built a stake in Vodafone Group Public Limited Company (NASDAQ:VOD) and has been in dialogue with the company, Morgan Stanley analyst Emmet Kelly stated that he sees a “compelling valuation” scope for European Telco consolidation, and the potential for towers monetization as reasons why Vodafone Group Public Limited Company (NASDAQ:VOD) shares could possibly prove attractive to an activist shareholder. Kelley maintains an Overweight rating and a price target of £185 on the shares.
According to Insider Monkey’s third quarter database, 18 hedge funds were bullish on Vodafone Group Public Limited Company (NASDAQ:VOD), with stakes totaling $613.7 million. Renaissance Technologies is the largest stakeholder of the company as of Q3 2021, with 28.5 million shares worth $441.5 million.
In addition to Kohl’s Corporation (NYSE:KSS), Peloton Interactive, Inc. (NASDAQ:PTON), and Exxon Mobil Corporation (NYSE:XOM), Vodafone Group Public Limited Company (NASDAQ:VOD) has gained the attention of activist investors.
5. Huntsman Corporation (NYSE:HUN)
Number of Hedge Fund Holders: 26
Huntsman Corporation (NYSE:HUN) is a Texas-based manufacturer of chemical products which are used primarily in industrial applications. Huntsman Corporation (NYSE:HUN) supplies its products to commercial customers including BMW, General Electric Company (NYSE:GE), Chevron Corporation (NYSE:CVX), The Procter & Gamble Company (NYSE:PG), Unilever PLC (NYSE:UL), and Walkaroo.
On January 14, Huntsman Corporation (NYSE:HUN) shares gained approximately 2% after Jeffrey Smith’s activist hedge fund, Starboard Value, nominated four directors for Huntsman Corporation (NYSE:HUN)’s board in order to “meaningfully” improve the operational efficiency and capital allocation at the company. Starboard Value disclosed an 8.6% ownership interest in Huntsman Corporation (NYSE:HUN) in September 2021, and stated that it might put forward different recommendations for improvement including potential business combinations and sale of assets. Jeffrey Smith himself would be on Huntsman Corporation (NYSE:HUN)’s board to oversee operational performance.
Deutsche Bank analyst David Begleiter on January 20 added Huntsman Corporation (NYSE:HUN) as a “Catalyst Call Buy”. With the company engaged in a proxy contest with Starboard Value ahead of the upcoming March 25 annual meeting, Huntsman Corporation (NYSE:HUN) will “pull out all stops” in delivering Q4 earnings and providing “strong” guidance at its earnings release on February 15, the analyst told investors in a research note. The analyst also expects Starboard to introduce a detailed plan in the coming weeks which outlines Huntsman Corporation (NYSE:HUN)’s earnings potential and a roadmap to get there. These “dueling plans/slide decks will be beneficial for the shares and investors”, according to the analyst.
In the third quarter of 2021, Yacktman Asset Management was one of the leading stakeholders of Huntsman Corporation (NYSE:HUN), with 6.6 million shares worth approximately $198 million. Overall, 26 hedge funds were bullish on the stock in the third quarter.
Here is what Madison Small Cap Fund has to say about Huntsman Corporation (NYSE:HUN) in their Q4 2020 investor letter:
“We have increased our exposure modestly to several industrial and materials names that we believe should benefit from the reopening of the economy in 2021. One such name is Huntsman Corporation (HUN); a company we have followed for more than 15 years and have never owned before. Huntsman Corporation is a global producer of organic chemicals. The company was founded by well-known businessperson and political figure, Jon Huntsman, in 1970 and has grown through its history into a diversified portfolio of chemical businesses Our interest in Huntsman coincides with the current through conditions in the global economy due to the Covid-19 recession. The company’s end markets are cyclical and demand for their products is highly price elastic. Additionally, the advanced materials business suffered due to the exposure to the aerospace original equipment manufacturer (OEM) down cycle. Despite these challenges, we believe management has executed well; no surprise, given their track record. We think Earnings before interest, taxes, and amortization (EBITDA) troughed in the second quarter and are heartened by the lack of further deterioration in 3Q and 4Q. Looking to the future, we see an intriguing reflation opportunity driven by the resumption of economic activity in late 2021. Further, we posit that the easy monetary policy, that has characterized this cycle, has inflationary side effects which would benefit a basic materials producer such as HUN. The company has also been moving downstream to more value-added businesses, which may drive EBITDA multiple expansion in the future.”
4. Kohl’s Corporation (NYSE:KSS)
Number of Hedge Fund Holders: 37
Kohl’s Corporation (NYSE:KSS) operates as an American retail chain, providing branded apparel, footwear, accessories, beauty, and home products via its stores and online selling.
Activist investors began pressuring Kohl’s Corporation (NYSE:KSS) in April 2021, calling for experienced directors with retail experience, reduced inventory levels, and a sale-leaseback of part of the company’s non-core real estate. In 2021, activist investor Macellum Capital Management, which owns nearly 5% of Kohl’s Corporation (NYSE:KSS), pushed the company to refresh its board of directors, suggesting nine new directors. Macellum was still not satisfied with the performance, and stated that Kohl’s Corporation (NYSE:KSS) can optimize its balance sheet by monetizing $4 billion of its real estate and returning the proceeds to shareholders through a buyback, which would elevate the stock. The activist investor observed that if Kohl’s Corporation (NYSE:KSS) was unwilling to make these changes, there are strategic buyers who would purchase Kohl’s Corporation (NYSE:KSS) at an attractive premium.
On December 9, activist investment firm Engine Capital, which owns a 1% stake in Kohl’s Corporation (NYSE:KSS), pushed the company to sell itself or separate its ecommerce business. Engine Capital believed that private equity firms might pay $75/share for Kohl’s Corporation (NYSE:KSS), whose digital business alone is worth $12.4 billion. On January 18, Starboard Value-backed Acacia Research was in talks with Kohl’s Corporation (NYSE:KSS) to bid on an acquisition.
BofA analyst Lorraine Hutchinson on January 26 moved to No Rating on Kohl’s Corporation (NYSE:KSS) after the company confirmed that it has received letters expressing interest in acquiring the company, citing her belief that the “stock is no longer trading on fundamentals”.
In Q3 2021, Arrowstreet Capital held the biggest stake in Kohl’s Corporation (NYSE:KSS), owning 4.2 million shares worth roughly $200 million. Overall, 37 hedge funds in the third quarter database of Insider Monkey were bullish on the stock.
3. Canadian National Railway Company (NYSE:CNI)
Number of Hedge Fund Holders: 42
Headquartered in Montreal, Canadian National Railway Company (NYSE:CNI) is a rail and transportation company that transports petroleum, chemicals, grain, fertilizers, coal, metals, minerals, and automotive products for enterprise and industrial customers in Canada and the United States.
Publishing its Q4 results on January 25, Canadian National Railway Company (NYSE:CNI) posted earnings per share of $1.35, beating estimates by $0.15. The Q4 revenue came in at $2.97 billion, outperforming estimates by $78.36 million.
TCI Fund Management, a British activist fund managed by billionaire Chris Hohn, owns the largest stake in Canadian National Railway Company (NYSE:CNI) as of Q3 2021, with 36.6 million shares worth $4.2 billion. TCI Fund Management pushed for board changes at Canadian National Railway Company (NYSE:CNI), and on January 25, the company reported that a new chief executive officer will be appointed, albeit it will not be the candidate that the activist investor put forward. Two new independent directors will also be hired on the board. TCI Fund Management emphasized on refreshing the board, adding experienced industry veterans and external directors to improve performance and governance at Canadian National Railway Company (NYSE:CNI).
Deutsche Bank analyst Amit Mehrotra on January 27 raised the price target on Canadian National Railway Company (NYSE:CNI) to $142 from $137 and kept a Buy rating on the shares following the “very strong” Q4 results.
According to Insider Monkey’s Q3 database, Bill & Melinda Gates Foundation Trust held a prominent stake in Canadian National Railway Company (NYSE:CNI), worth $1.5 billion. Overall, 43 hedge funds were bullish on the stock in Q3 2021, with stakes totaling $7.3 billion.
2. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 62
Peloton Interactive, Inc. (NASDAQ:PTON) is a New York-based company that markets and sells interactive fitness products in North America and internationally, in addition to offering subscriptions to online exercise classes.
Blackwells Capital, an activist investor based in New York which owns a less than 5% stake in Peloton Interactive, Inc. (NASDAQ:PTON), called for the company to remove its CEO John Foley from his position and put itself up for sale on January 24. Blackwells Capital has cited “grave” concerns over Peloton Interactive, Inc. (NASDAQ:PTON)’s performance that led to this petition. Further, the activist investor in its open letter to the company, criticized Peloton Interactive, Inc. (NASDAQ:PTON) for not capitalizing on its 2020 success, dwindling sales, and bad PR in mainstream television shows. The firm also highlighted Peloton Interactive, Inc. (NASDAQ:PTON)’s enormous fixed costs, directionless strategy, excessive inventory, and masses of unsatisfied shareholders. The stock is at 80% below its 2021 high.
Brian Lichtor from Roundhill Investments stated on January 22 that with an enterprise value of under $10 billion, Peloton Interactive, Inc. (NASDAQ:PTON) could make for an attractive acquisition target given its strong brand loyalty and valuable intellectual property. He believes that Peloton Interactive, Inc. (NASDAQ:PTON) could potentially be acquired by Apple Inc. (NASDAQ:AAPL), effectively integrating Peloton into the Health app. Other contenders for a possible acquisition could be Amazon.com, Inc. (NASDAQ:AMZN) and NIKE, Inc. (NYSE:NKE), according to Lichtor.
On January 26, Baird analyst Jonathan Komp lowered the price target on Peloton Interactive, Inc. (NASDAQ:PTON) to $40 from $70 and kept an Outperform rating on the shares. He is maintaining his 2023 EBITDA projections assuming the company announces a significant restructuring plan which in his view remains a potential catalyst.
At the close of the third quarter of 2021, Tiger Global Management was the biggest Peloton Interactive, Inc. (NASDAQ:PTON) stakeholder, with more than 7 million shares worth $626.4 million. Overall, 62 hedge funds were bullish on the stock in Q3.
Here is what Carillon Tower Advisers has to say about Peloton Interactive, Inc. (NASDAQ:PTON) in its Q2 2021 investor letter:
“Peloton Interactive operates a connected fitness platform offering live and on-demand classes allowing users to exercise at home. The firm’s shares were pressured in the quarter after Peloton announced a voluntary recall for both its legacy treadmill (Peloton Tread+) and its newly-launched base model treadmill (Peloton Tread). The issue surrounding the latter is somewhat troubling, as it appears it may be the result of an engineering flaw. This new treadmill offering was expected to be a key growth driver in the second half of 2021, and this development reduces our confidence in Peloton’s product pipeline. Therefore, we sold the stock.”
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 64
Based in Irving Texas, Exxon Mobil Corporation (NYSE:XOM) produces crude oil, petroleum, petrochemicals, and natural gas, which it supplies in the United States and internationally. On January 19, RBC Capital analyst Biraj Borkhataria upgraded Exxon Mobil Corporation (NYSE:XOM) to Sector Perform from Underperform with a price target of $90, up from $70.
According to the Q4 earnings preview posted by Exxon Mobil Corporation (NYSE:XOM) on January 31, the consensus EPS estimate is $1.94, and the revenue consensus came in at $84.58 billion, up 81.7% year-over-year.
On January 26, Exxon Mobil Corporation (NYSE:XOM) declared a quarterly dividend of $0.88 per share, in line with previous, offering a forward yield of 4.75%. The dividend is payable on March 10, to shareholders of record on February 10.
Activist investors rallied against Exxon Mobil Corporation (NYSE:XOM) on January 31, when the company published its sustainability report for 2022, expressing its commitment to reach net-zero operational emissions by 2050, when Exxon Mobil Corporation (NYSE:XOM) was responsible for mammoth Scope 3 emissions in 2021. This has raised questions about the firm’s efficacy and commitment towards managing climate risk.
UBS Asset Management and Nest, the largest British pension scheme, pulled out their investment from Exxon Mobil Corporation (NYSE:XOM) in December, citing insufficient progress in managing climate risks as the reason for pulling out their funds. The activist shareholder, named Follow This, filed a shareholder resolution in December to vote at Exxon Mobil Corporation (NYSE:XOM)’s 2022 annual general meeting, and insist on better planning its decarbonization strategies. Similarly, in 2021, minority shareholder Engine No 1 successfully replaced three members on Exxon Mobil Corporation (NYSE:XOM)’s board with climate-conscious candidates.
GQG Partners held the largest Exxon Mobil Corporation (NYSE:XOM) stake in Q3 2021, owning 26.5 million shares worth $1.5 billion. Overall, 64 hedge funds tracked by Insider Monkey in the third quarter held stakes amounting to $4.6 billion in Exxon Mobil Corporation (NYSE:XOM).
Here is what First Eagle Investment Management has to say about Exxon Mobil Corporation (NYSE:XOM) in its Q2 2021 investor letter:
“Leading contributors in the First Eagle Global Fund this quarter included Exxon Mobil Corporation. The continued recovery in oil prices as economies reopen helped fuel another strong performance across the energy complex, including shares of Exxon Mobil. Exxon Mobil recently lost a proxy fight with an activist investor that took three of the company’s 12 board seats. While the press was focused on the investor’s concerns over Exxon Mobil’s long term energy transformation strategy, other factors fundamental to shareholder returns—like capital discipline and balance sheet management—were also at play.”
You can also take a look at Top Dividend Stock Picks of Billionaire George Soros and Warren Buffett’s 5 Worst Performing Stock Picks From 2021.
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Disclosure: None. 10 Stocks Activist Investors are Buying is originally published on Insider Monkey.
