Three Activists, Three Real Estate Plays, Three Stocks Popping

Lastly is American Realty Capital Properties Inc (NASDAQ:ARCP), which activist Keith Meister of Corvex Capital touted at the conference, saying he sees 25% to 50% upside in the stock, and stating that “We’re owning bond-like risk and making equity-like returns”. Corvex greatly increased his position in American Realty Capital Properties Inc (NASDAQ:ARCP) during the first quarter, by 782% to 70.64 million shares, making him by far the largest shareholder among those we track. However, even factoring in the 2.73% spurt today, shares are still trading slightly below their lowest closing level in the first quarter, suggesting Meister has not seen great returns from the bulk of his holding, and that it’s not too late for other investors to come along for the projected ride. Larry Robbins of Glenview Capital held the largest position in ARCP after Meister, totaling just under 17.17 million shares. He also greatly increased his holding, by 185%, in the first quarter.

Following activist funds like Starboard Value 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 Sandell’s or Meister’s 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. We have found through extensive research that the top small-cap picks of hedge funds are also capable of generating high returns and built a system around this premise. In the 34 months since our small-cap strategy was launched it has returned over 139% and beaten the S&P 500 ETF (SPY) by more than 80 percentage points (read more details).

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