This Week's Activist Filings

By Sham Gad | November 17, 2011 AAA

The anxiety over the European financial crisis has not kept investors from buying equities, and in some cases, significant positions. Recent 13D filings reveal that some major investors are increasing pressure on companies to deliver for shareholders.

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Techs Big Target
Internet giant Yahoo! (Nasdaq:YHOO) has been a company without a sense of direction for quite some time. First it was anticipated that the company would sell itself to Microsoft (Nasdaq:MSFT), a couple of years back. Yahoo! management at the time rebuffed an offer from Softy that was significantly higher than today's share price. Currently, Yahoo shares trade for about $16, valuing the company at close to $20 billion. The company has nearly $2 billion in net cash on the balance sheet and generates a lot of free cash flow.

Hedge fund giant Third Point, owner of 5.2% of Yahoo's common stock, is working to shuffle things up at the company's board. Last week Third Point requested two board seats and a resignation from the board of co-founder Jerry Yang. Third Point's main concern is that Yahoo! is working with private equity groups to lever up the balance sheet. With Microsoft supposedly still interested in Yahoo!, this tech drama will be one to watch. (For more on private equity firms, see A Primer On Private Equity.)

Value in the Eye of the Beholder
Many notable investors have also recently added to existing positions, thus providing investors with some fertile investment ideas. Notable activist Carl Icahn increased his stake in WebMD (Nasdaq:WBMD) and now owns 9.5% of the company. WebMD shares currently trade close to $33, down from a 52 week high of $58. With the continued trend toward greater online use for medical information, WebMD is certainly not a dinosaur in the medical industry; with Icahn increasing his position, he may have a plan for boosting the value of the company.

Yet, the Icahn touch is certainly no guarantee of success. Carl Icahn is also selling shares in consumer products giant Clorox (NYSE:CLX), after a highly publicized effort to buy the company proved unsuccessful. Despite the fact that Icahn was offering to buy Clorox at a substantial premium to the current stock price, the market never fully bought into the idea, while Clorox management was also unimpressed. Icahn unloaded over 1.7 million share over the past several weeks, but still owns over 8% of Clorox. (For more on Carl Icahn, see Carl Icahn's Investing Strategy.)

The Bottom Line
With thousands of stocks to choose from, paying attention to what professional money managers are buying is an absolutely worthwhile effort. Just one great idea can reap a lifetime of investment gains. However any investment pick of another, is merely an idea at first, not a buy recommendation. Only after spending some time performing your own due diligence should any idea become an actual investment.

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At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.

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