Activist Investors Disrupt Wall Street's Late Summer Lull

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activist investor carl icahn apple stock
Heidi Gutman, CNBC/NBCU Photo Bank via Getty ImagesCarl Icahn, chairman, Icahn Enterprises.
By Patti Domm

With the stock market in a summer lull, Wall Street's activist investors are looking downright hyperactive.

With some of the hottest pockets in the market stirred up by activism, it's hard to ignore sudden outsized moves, but analysts say investors shouldn't just jump on the activists' coattails without doing their own homework.

"I think you really ought to know what kind of investor you are and what your process is, so I would argue you shouldn't be distracted by any one person," said Bill Stone, chief investment strategist at PNC Wealth Management.


Just Tuesday, Bill Ackman resigned from the J.C. Penney (JCP) board after losing a high-profile feud. That stock sank nearly 4 percent. BeaconLight Capital separately criticized retailer Jos. A Banks Clothiers (JOSB) for not returning cash to shareholders and said it should reorganize its board, a move that sent its stock up more than 12 percent. And to cap a day of excitement, Carl Icahn announced, via Twitter, that he had bought a sizeable stake in Apple and was talking to CEO Tim Cook about a bigger share buyback program. Apple (AAPL) flew nearly 5 percent on the news.

Wednesday will be a busy day for activists, since big shareholders have to file their second quarter holdings with the Securities and Exchange Commission by the end of the day. Appaloosa Management landed its filing after the bell Tuesday, showing its stake in Goodyear Tire & Rubber (GT) grew to 22 million, up some 6.8 million shares since March 31. That stock jumped in after-hours trading.

Experts who have followed Icahn say he' s one of the stronger names to follow. Many times activists don't immediately reveal their holdings but work on a relationship with management to extract changes. Icahn, however, has made it clear what he wants from Apple -- a bigger share repurchase program.

Icahn's other holdings include:
  • Herbalife (HLF), up 96 percent year-to-date.
  • Netflix (NFLX), up 180 percent year-to-date.
  • WebMD Health (WBMD), up 131 percent year-to-date.
  • Federal-Mogul (FDML), up 114 percent year-to-date.
Charlie Tian, founder of Gurufocus.com, said Icahn typically makes out well on his larger holdings. "Not all of them go up but the important ones, the big ones go up," he said. "His second largest holding is Chesapeake Energy (CHK). He gained 40 percent on his position."

Tian said he started the Guru tracking website after he made money following big investors in the late 1990s. A physicist by trade, he had started making big gains trading in the tech bubble.


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