Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

SOLD! Activist Marcato Capital And Sothebys (BID) Reach Agreement Over Disputed Legal Files

In the latest development regarding Richard McGuire‘s Marcato Capital Management and the recent target of its activism, Sothebys (NYSE:BID), the $3.19 billion global art business company has agreed to provide Marcato with access to the Redacted Pages from the case Third Point LLC v. Ruprecht, according to a filing with the SEC. Late last month, Marcato acquired an additional 1.5 million shares of Sothebys (NYSE:BID) to take its holding to 6.57 million shares. The stake represents 9.46% of the company’s outstanding common stock.

Robert Adrian Hillman/

Robert Adrian Hillman/

Founded in 2010, Marcato invests in small and mid-sized companies. Richard McGuire, the MBA from Harvard University, worked at Bill Ackman’s Pershing Square before he set up his own fund. Currently, Marcato has about $3.83 billion worth of assets under management, while the market value of its public equity portfolio stood at $2.70 billion at the end of March. The finance and consumer discretionary sectors contributed 27% and 33% respectively to the above portfolio value. The top equity holdings included Bank of New York Mellon Corp (NYSE:BK), Lear Corporation (NYSE:LEA), and NCR Corporation (NYSE:NCR), which we’ll discuss later.

Richard Mcguire
Marcato Capital Management

Following activist funds like Marcato is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. A fund like Marcato can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself 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. They can also focus on only the best picks of the activist hedge funds, rather than all of them. We have found through extensive research that the top small-cap picks of hedge funds are capable of generating high returns and built a system around this premise. In the 33 months since the Insider Monkey small-cap strategy was launched it has returned over 142% and beaten the S&P 500 ETF (SPY) by more than 84 percentage points (read more details).

Previously, Marcato filed a Notice of Challenge on May 29 whereby the fund challenged the confidential treatment of the legal proceedings of the above mentioned case. However, Marcato agreed to withdraw the Notice following an agreement with Sothebys on June 5, providing it confidential access to the Redacted Pages. Marcato is the second activist that Sothebys is facing, the first one being Third Point’s Dan Loeb, who ended up winning three board seats last year. However, Marcato is still unsatisfied with the company’s performance and in a letter sent to Sothebys in February, it demanded an immediate $500 million share repurchase program and the replacement of the company’s chief financial officer. So far this year, Sothebys (NYSE:BID)’s stock has appreciated by 7.32%. Loeb’s Third Point is the largest stockholder of Sothebys, holding 6.65 million shares valued at $281.03 million.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.