- What does the Alternative Activist mean?
As the Alternative Activist, and not an actual Activist Investor, I have the choice (read: alternative) between investing or not in an activist investment. I will select only what I believe to be the best activist investments.
- What exactly is the investment strategy?
The investment strategy is to quickly evaluate new activist investor 13D filings and determine whether to invest or not. Mimicking activist investments can be very profitable as the returns generated typically smash the S&P 500. That being said, not all activists are created equal, and activists with a track record of success are more heavily weighted in an investment decision. As are financial characteristics of the target, such as a target with a net cash and positive earnings vs. a debt-laden target that struggles to service its debt.
- How much of your portfolio do you allocate to this strategy?
Given the minimal level of diligence conducted on the targets, including the economic viability of the industries in which they operate, competition, talent and credibility of management, and even a full understanding of the target business model, at no point should this strategy be a dominant percentage of your portfolio.
- What is the Activist Investor database?
The database tracks all targeted public companies where an activist investor has filed a 13D form with the SEC. An investor is required to file a 13D with the SEC within 10 days of crossing the 5% ownership threshold or the investor is launching an activist campaign. The 13D signals the investor intends to be “active” in the target. The filing includes interesting information such as how many shares owned, amount paid for the shares, recent purchases/sales, and most importantly, the activist’s purpose of investment and plans for activism–and if we’re lucky, an entertaining letters to shareholders. When an activist investor files a 13D with the SEC, all the relevant information from the filing is added to the database. The database includes thousands of targeted companies and spits out actionable information on the targets and activist investor, as seen in the target snapshots on this website.
- How do you calculate gains and losses?
Gains and losses or returns are calculated as the percentage change in the current price per share from the closing price per share on the day prior to the 13D filing. If the activist’s ownership has dropped below the 5% threshold, the position is considered closed, and the return is calculated as the percentage change in the closing price per share on the day the activist’s ownership dropped below 5% from the closing price per share on the day prior to the 13D filing. If the target is acquired, the return is calculated as the percentage change between the acquisition price per share from the closing price per share on the day prior to the 13D filing.
- What does the database exclude?
The database generally excludes any activist investments made after the announcement of an acquisition of the target (e.g., merger arb positions taken by activist GAMCO Investors). It also excludes activist campaigns for mutual funds, ETFs, etc. (e.g., Bulldog Investors and Karpus Management have launched campaigns against funds). Further, spin-off transactions that result in activist positions are not tracked (e.g., Jana Partners reported investment in Civeo, which was spun out of Oil States International–the original target), nor are activist stakes in private entities.