An Activist's Take On Activism's Increased Popularity

Although activist investing has been prominent since the '80s, in the last few years it has managed to catch the imagination of even the average investor. The trend has become that average investors are now more interested in buying stocks of companies that involve a strong presence of activist investors, such as the likes of Carl Icahn or Bill Ackman, than before.

Keith Meister, founder of hedge fund Corvex Management LP, was on CNBC recently to explain why activism has gradually become the norm.

Because It Works

"Activism is very, very popular [...] Why is that?" Meister asked rhetorically. "It works."

He explained, "I think active investors have been very, very successful working constructively with companies, and I think to the companies' credits, for the most part, they have engaged with activists and try to see the forest for the trees, listen to shareholders and think about taking an owners' perspective to how to create value."

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Management Buying The Idea

He continued, "It doesn't mean every situation ends with activists and management working together.

"But in many situations," Meister continued, "you hear about activist owners coming to a management team, expressing an idea, getting that management board to buy into the idea and then implementing it."

Win-Win For Companies And Activists Both

On activism becoming a successful strategy for hedge funds, Meister remarked, "What happens? Success breeds success. If activists are able to invest in companies, help create lots of value, two things happen.

"One, they get more capital to invest in more companies. But then two, other companies look around and say, 'How do we become the internal activist?'

"I hear lots of CEOs today say, 'I am the internal activist. I am the new CEO of McDonald's; I am going to be an internal activist. I am going to think about what I should do.' And that’s actually really, really positive," Meister concluded.

 
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