What is an Activist Investment Group?Posted by Johansson Reimer on June 16th, 2021 One of the questions I get most often in my office is regarding what is an activist investor. In essence, activists are individual investors who take a strong stance against corporations that are publicly traded on the stock market. They use a variety of tactics to spread the word about companies that are undervalued, but in my opinion they have no other intentions. After reading several books and watching several episodes of CNBC's "Viewpoint," I have come to the conclusion that these types of investors may indeed be on the rise. To make things crystal clear, there is nothing wrong with institutional investors. If you are able to find a company with great growth potential and reasonable valuation, your portfolio will be completely immune to any activist push for change. On the other hand, I personally feel that institutional investors are becoming less engaged because of a number of factors. agency will now discuss three specific reasons why I believe this trend is at least a year or two old. First, I would like to point out that I am not a big fan of shareholder activism. This doesn't mean that I don't support it when necessary. I simply feel that it can have unintended consequences. Take, for example, a large oil and gas company that are having difficulty getting new oil leases approved. The company's stock price is taking a dive, and a bunch of angry investors decide to start trading in and out of the stock in hopes of driving up the price. While it is true that the price will eventually stabilize, in the long run this type of behavior can drive up the company's valuation unnecessarily. Second, I would like to point out that I do not believe that all hedge fund activism is initiated as a shareholder-driven strategy. I have noticed a lot of new fund activity that seems to be coming from venture capital firms and angel investors. These firms have funding rounds that focus on certain sectors or companies. As a result, the activists may target a company that is doing well in one area, like oil & gas, and then "pull" the stock when it performs poorly in another industry. Activist investors can take a different approach when deciding what is an activist strategy. Instead of targeting one company or organization, these people may decide to target several companies that they believe are guilty of corporate governance abuse. For example, they may decide to target three big oil & gas companies that have been abusing royalty rates in the past. They may do similar research to those companies in the last quarter. This would cause the target companies to fight back with strong ad campaigns or legal actions. In my opinion, the best way for investors to understand what is an activist investor is to consider their points of view when analyzing a company's financial statements. We have many examples of this in the news today. Two examples are investors who have taken actions against two of the largest oil & gas companies in the world. One of these investors sent a letter to Continental Investors demanding that the company stop its plan to explore for and mine for coal. The other investor took a similar action with another energy company. In fact, many of the new shareholder activists are using the internet as part of their strategy. One type of social media that has emerged as a tool for this type of investor activity is Twitter. There have also been articles written about how to use Twitter to target certain companies. In addition, many companies have created dedicated twitter feeds to focus on issues of concern to the company and its shareholders. What is an activist investment group? Sometimes, this is not a company but instead a person or a group of people who are participating in such activity. They may be nice members or they may be people who have attended an online stock trading course. It seems that technology has provided new platforms for many types of investor activities. Hopefully, we will see more of this and I believe it is good that people are taking advantage of such opportunities.Like it? Share it! More by this author |