It's always interesting to investigate companies that have activist investors. Activists usually exist when they see a great opportunity in a business. Even more, having an activist investor involved in a company is like a personal advocate fighting for your cause. Activists tend be large shareholders of the target company's stock, and expend time and money to make sure that the share price goes up, not down.

IN PICTURES: 20 Tools For Building Up Your Portfolio

Activism in Today's World
When a shareholder goes activist, it usually means that he sees long-term fundamental value in a business. As such, activist investors aren't concerned with the market environment first and foremost, but instead with the specifics of the company. Of course, not all activist campaigns end in success either. Like an activist, individual investors should do their own work before piggy backing on a name. (For more, see Activist Investors: A Good Or Bad Thing?)

Cascade Investments, the investment arm of billionaire Bill Gates increased its stake in Strategic Hotels and Resorts (NYSE:BEE) in a big way. Cascade now owns 12.2 million shares, or 8.6% after buying an additional 8 million shares in an equity offering by the company. The company is a REIT focusing exclusively on the ownership and management of luxury hotels and resorts in the U.S. and Europe. Some of the brands associated with this company include the Intercontinental, Hyatt and the Four Seasons. As you might guess, in today's environment, the company's operations aren't flourishing. There is currently no dividend, a company feature of REITS. Yet considering its marquee brand names and Cascade's long-term orientation, it may be worth a closer look.

The 800 Pound Activist
Carl Icahn may arguably be the most well-known activist. Icahn's firm, Icahn Partners, recently disclosed that it owns nearly 12% of Hain Celestial Group (Nasdaq:HAIN). Hain is a distributor and manufacturer of natural and organic foods. It operates in an industry - natural foods - which continues to experience strong growth. Hain's main competitor, United Natural Foods (Nasdaq:UNFI) is the largest distributor of organic and natural foods. Thereafter, the market is very fragmented. So major chains like Whole Foods (Nasdaq:WFMI) rely on the depth of Hain and UNFI for a significant portion of their items. Hain and UNFI have both been in business for decades, and that has enabled them to separate themselves from the other smaller, fragmented distributors.

At the moment, Hain currently trades for 38-times earnings, while UNFI commands a P/E of 21. So far, Icahn has made no public plans for change, and simply is wanting to work with management. You can rest assured that if Icahn sees something going wrong, he will become more involved.

The Bottom Line
Having an activist investor involved can often be like having the best shareholder activist on board. Still, before making any commitments, its essential to make sure you understand the situation completely. (For related reading, see Could Your Company Be A Target For Activist Investors?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  2. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  3. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  4. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  5. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  7. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  8. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  9. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  10. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  1. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  2. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  3. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  4. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  5. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  6. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>

You May Also Like

Trading Center