Adobe Systems Incorporated (ADBE), Gardner Denver, Inc. (GDI): Can Retail Investors Outperform The 13D Activist Fund On Their Own?

Other hedge funds which the 13D Activist Fund appears to track include Blue Harbour Group, Corvex Capital, and Marcato Capital Management. Two of Blue Harbour’s 13Ds are very recent; its only other new activist target from the last two years, CACI, has beaten the market by 7 percentage points per year annualized. Corvex’s universe of recent 13D filings includes five stocks. One has performed evenly with the market while the others have generally underperformed. There are two eligible picks from Marcato: Lear, which has beaten the market, and DineEquity Inc (NYSE:DIN), which has underperformed- the average outperformance on an annualized basis is 12 percentage points.

Therefore, these six funds have filed 19 original 13Ds in the last two years which are not new enough for the short time frame to distort the annualized returns on the investment. On average they have beaten the S&P 500 by 4 percentage points per year, with a good deal of variance depending on the fund (although some of that variance may be due to random chance and the small sample size). This is actually about in line with the 13D Activist Fund’s 5% outperformance on an annualized basis since its inception, and there are expense ratios to consider as well.

More recently, however, the broader portfolio of all 13D filings has not done as well at least compared to the mutual fund. The strategy of starting 2013 owning each of these stocks which had already been reported in 13Ds, and then adding new additions at the end of each month, had returned a little over 10% as of the end of August. This is below the returns of both the overall market and what the 13D Activist Fund has reported on a year to date basis.

There is a good deal of variation in these results as well, and some activist picks which were initiated a longer time ago have done well in 2013, so we wouldn’t take any of these results to be a final answer on whether or not the fund managers are adding value in excess of the fees they charge. More generally, the value of this fund is that retail investors would not have to either buy every stock mentioned in an activist’s 13D as it is released- which would require a good deal of capital- or perform in depth fundamental analysis and then limit purchases to a subset of these stocks. Still, we would certainly not be ready to conclude that the 13D Activist Fund outperforms a full portfolio of stocks targeted by activists.

Disclosure: I own no shares of any stocks mentioned in this article.