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.
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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?)
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