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Blog: Activist Investors

By Jeff Pollock

Companies on occasion become the target of an “activist investor”, someone that buys a chunk of stock and ruffles feathers publicly in its advocacy to realize change.

For a frustrated shareholder holding a dog, one often hopes to see a takeover or, failing that, an activist step in to serve as a catalyst to drive the price higher. More often than not, news of activist involvement accompanies an appreciation to the share price.

Last week, Elliot Investment Management LP took aim at Suncor Energy, a company whose stock price has lagged its peers by 90% over the previous three years. It criticized the oil major for having a “slow-moving, overly bureaucratic corporate culture.” Despite buying a mere 3.4% of the total company, the board and management agreed to meet with the activist and the stock jumped 9.5% in response.

Activist investing is a rare occurrence in Canada, at least publicly. In 2021, only 47 proxy contests took place challenging publicly traded Canadian companies. Globally, however, they’re far more common – particularly in the United States.

The rise of environmental, governance, and social concerns is likely to liven shareholder proposals in the future. Though overwhelmingly defeated over the weekend, Berkshire Hathaway shareholders proposed to replace its founder Warren Buffett as chair with someone that is independent from the company.

Should you follow an activist into a stock?

According to S&P Capital IQ, stocks that become an activist target outperform the market by 6% in the four weeks before and after a position was disclosed. One year later, the targets outperformed the market by 8%. Two years later, 11%. Three years in, 17%.

While activist investors create a lot of disruptive headlines, their involvement statistically serves as a historic catalyst to drive a stock price higher.

DISCLAIMER: The opinions expressed in this publication are for general informational purposes only and are not intended to represent specific advice. The views reflected in this publication are subject to change at any time without notice. Every effort has been made to ensure that the material in this publication is accurate at the time of its posting. However, Schneider & Pollock Wealth Management Inc. will not be held liable under any circumstances to you or any other person for loss or damages caused by reliance of information contained in this publication. You should not use this publication to make any financial decisions and should seek professional advice from someone who is legally authorized to provide investment advice to assess your goals and objectives, personal circumstances, and make an informed suitability assessment.

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