Looking at activist investors for ideas

I enjoy reading The Official Activist Investing Blog for ideas and keeping up with corporate governance stuff floating around.  There was a recent post that was showcasing a couple of activist investments pushing for changes in corporate governance.  While the content is interesting, I thought I would mention this as another way to generate investment ideas.

If you read through the article you will see links to the SEC proxy filings that the activist investors file.  The activists tend to file presentations on the company and what they think needs to change.  They are usually quite thorough and can be treasure troves of data.  Sometimes the way they slice and dice the financial statements and show comparable companies can reveal useful things.

I don't think that a small guy like me could make investments that require an activist investor as a huge part of the thesis.  In certain instances it is nice to invest alongside guys pressing for change, although it depends on their approach.  Psychology speaking, people tend to become further convinced of their own ideas when others try to convince them of the opposite.  I briefly touched up ValueAct Capital in my post on Energy Solutions and mention an interview with a partner at the firm.  Based on the interview, I think incorporating their activist presence into a thesis would be more credible than a more combative activist.

A point I'd like to rehash as much for myself as anyone else is that investing comes down to price.  If the price of an investment is a lot lower than the value of a company, an activist investor can only be a positive force.  If it seems like the price and value are pretty comparable, an activist investor will be acting a way that only they know.

On the aforementioned blog, there is a link to a presentation by Barington Capital about Ameron International.  Reading through the presentation, you get the idea that management is pretty greedy and has no stake in the company.  While at a certain price this might be acceptable (I still haven't taken a stance whether or not this is a proper stance), the company doesn't seem that cheap to make it worth owning if there wasn't an activist involved.  As a point of interest, Barington highlights 10 past successful activist investments they were involved with.  This could be a starting point for researching companies because they have already responded to the agitation for change and you don't have to worry about any uncertainty of the activist initiatives.

Talk to Andrew about activist investors and their ideas