Tag Archives: activist

Activist Attack On Female CEOs

There are 27 companies in the S&P 500 that have a woman CEO – just 1 of those companies have any of the three common takeover defenses in place – including staggered boards, poison pills or unequal voting rights. Nearly one in four of the men-led S&P 500 companies have at least one defense. Now, an even bigger question, is it that activists are targeting women-led companies or is it that activists are really just target underperforming companies? (click to enlarge) With Carl Icahn’s targeting of Xerox (NYSE: XRX ), it’s official, activist investors are out to get female CEOs. Part of this is the fact that they have poor defenses against said activists. There are 27 companies in the S&P 500 that have a woman CEO – just 1 of those companies have any of the three common takeover defenses in place – including staggered boards, poison pills or unequal voting rights. Reynolds American (NYSE: RAI ) is the lone exception, but the takeover defense was in place long before Susan Cameron showed up there. Nearly one in four of the men-led S&P 500 companies have at least one defense. The bigger question, I think, is not having these takeover defenses, is that good or bad corporate governance practice? Xerox’s Ursula Burns is just the latest to get a call from an activist this year. Nelson Peltz’s Trian Fund has been a true woman hater of late, taking on DuPont’s (NYSE: DD ) Ellen Kullman and PepsiCo’s (NYSE: PEP ) Indra Nooyi before that. Peltz has also been putting pressure on Mondelez’s (NASDAQ: MDLZ ) Irene Rosenfeld. Bill Ackman and his Pershing Square ( OTCPK:PSHZF ) have joined in on the Mondelez activist fiasco as well. David Tepper, the recent TerraForm (NASDAQ: TERP ) activist, was part of a group with frontman Harry Wilson that went semi-activist on GM (NYSE: GM ) CEO Mary Barra to force her into a massive buyback. Now, an even bigger question, is it that activists are targeting women-led companies or is it that activists are really just target underperforming companies? Is it safe to assume that activists target women CEOs because they see them as easy targets? And it could be that Wall Street is simply giving women the tough turnaround jobs that prove impossible – Marissa Mayer, Yahoo (NASDAQ: YHOO ), anyone? Just chew on this will you; takeover defenses are said to weaken shareholder rights. Hence, women-led companies score better in the corporate governance department. And there’s the strong correlation of underperforming stocks and weak shareholder rights.

Spinoffs: Looking For Value

Investing in and around spinoffs has been an extremely lucrative endeavor over the past decade, according to the Nov. 30 issue of Value Investor Insight. Indeed, since the end of 2002, Bloomberg has maintained a U.S. Spin-Off Index, which tracks the share prices of newly spun-off companies with market capitalizations of more than $1 billion for three years after they begin trading. Over the near 13-year period tracked, Bloomberg’s U.S. Spin-Off Index has risen 557%, compared to a return of 137% for the S&P 500. Moreover, spinoff activity is close to an all-time high as companies, spurred on by activists, try to unlock value for shareholders by splitting up their businesses. This year’s total number of spinoffs is expected to be 49, the fourth-highest level on record. However, more often than not, due to a number of factors, spinoffs are mispriced by the market, which can lead to some very attractive opportunities for value investors. In this month’s issue of Value Investor Insight , four spinoff experts – Murray Stahl of Horizon Kinetics, Joe Cornell of Spin-Off Advisors, The London Company’s Jeff Markunas and Jim Roumell of Roumell Asset Management – discuss the key factors that lead to spinoff mispricing and where they’re looking for opportunity today. (click to enlarge) Spinoffs: Four key factors There are four key structural factors that can lead to spinoffs being mispriced : Limited information – The documentation filed with the SEC when companies split can be quite complex, and the pro-forma financials can be difficult to analyze. Moreover, analyst coverage tends to be limited, and investors, rather than do the legwork themselves, would rather look elsewhere. Forced selling – A spinoff may see a parent company force a SpinCo onto a shareholder that doesn’t want, or legally can’t hold the shares, which will lead to selling. An S&P 500 Index fund can’t own a spinoff company outside the index, for example. Sandbagging – SpinCo managements usually receive significant financial incentives to underperform and over-deliver. Top managers’ incentive stock plans are typically based on average share prices of the spinoff company for the first 20 or so days of trading after the spinoff, which can lead to sandbagging of the highest order before those prices are locked in. ” Capitalism works ” – According to Value Investors Insight , when a SpinCo leaves its parent, “pent-up entrepreneurial forces are unleashed” as “the combination of accountability, responsibility, and more direct incentives take their natural course.” In other words, without the parent, the newly independent company can take advantage of capitalist forces to improve performance. Spinoffs: Looking for value So what do the experts look for in a good spinoff? According to Murray Stahl of Horizon Kinetics, there are four key characteristics to look for when a company spins off an unwanted subsidiary or division. First, a higher-margin business is spinning off a lower-margin business. Second, CEO movements. If the CEO of the larger company decides the best place to be is with the spinoff it’s, “a message to heed.” There’s also the capital structure of the SpinCo to consider. Too much debt dumped on the SpinCo from the parent can be a burden that haunts the company and strangles growth. That said, if figures show that the debt can be paid down over time, this creates an opportunity, like a publicly-traded leveraged buyout, according to Murray Stahl. And the last spinoff situation that creates an opportunity for profit is the very small spinoff that those engaged in industrial-scale money management are unable or unwilling to own (market cap

ETF Deathwatch For November 2015: Investors Shun Smart Beta

ETF Deathwatch membership rolls increased by eight for November, with 21 additions and 13 removals. Eight of the funds were removed from the list because they went out of business in October. Five others were discharged due to improved health, a more honorable way to get off the list. The net increase leaves the count at 343: 246 ETFs and 97 ETNs. Thirteen of the 21 (62%) additions this month are smart-beta funds. “Smart beta” is the industry terminology applied to ETFs that weight each stock using factors other than market capitalization. Thirteen of the 21 (62%) additions this month are smart-beta funds. These alternative factors might include volatility, yield, momentum, value, earnings, revenue, or a combination of these and other factors. The ETF industry is currently enamored with smart-beta funds, and many new products coming to market carry the smart beta label. The reason for this is easy to see because nearly all of the traditional market-capitalization-weighted indexes are already well-represented in the ETF space. Smart-beta approaches can use a virtually unlimited combination of factors to produce a unique ETF. It is much easier to claim an investment vehicle is “new” when it is not based on a traditional capitalization index. However, despite the industry push and hype surrounding smart beta, ETF investors have been slow to embrace many of these vehicles. We categorize ETFs into seven broad categories. Unleveraged equity ETFs and ETNs are classified as either a sector, international, or a style & strategy ETF. There are currently 65 ETFs from our style & strategy classification on ETF Deathwatch. All 65 of these funds carry the smart beta label. Within the international classification, 52 of the 72 funds on Deathwatch are smart-beta funds. With 100% of the style & strategy funds and 72% of the international funds on ETF Deathwatch categorized as smart-beta funds, it is easy to see that investors have not fully embraced this corner of the ETF universe. Liquidity is a major concern when trying to buy or sell any ETF or ETN on ETF Deathwatch. Only 16 traded every day in October. The other 327 (95%) had at least one day with zero volume. In a true display of illiquidity, 15 of these ETFs and ETNs went the entire month of October without a single trade. The average asset level of products on ETF Deathwatch increased from $6.3 million to $6.8 million, and the quantity of products with less than $2 million decreased from 76 to 73. The average age decreased from 48.8 to 48.0 months, and the number of products more than five years old held steady at 114. Here is the Complete List of 343 Products on ETF Deathwatch for November 2015 compiled using the objective ETF Deathwatch Criteria . The 21 ETPs added to ETF Deathwatch for November: AlphaMark Actively Managed Small Cap (NASDAQ: SMCP ) ALPS STOXX Europe 600 ETF (NYSEARCA: STXX ) Barclays Inverse U.S. Treasury Aggregate ETN (NASDAQ: TAPR ) DB 3x Japanese Govt Bond Futures ETN (NYSEARCA: JGBT ) Deutsche X-trackers DJ Hedged Intl Real Estate (NYSEARCA: DBRE ) Deutsche X-trackers S&P Hedged Global Infrastructure (NYSEARCA: DBIF ) EGShares EM Quality Dividend ETF (NYSEARCA: HILO ) First Trust Eurozone AlphaDEX ETF (NASDAQ: FEUZ ) Global X Guru Activist ETF (NASDAQ: ACTX ) iShares Commodity Optimized Trust (NYSEARCA: CMDT ) iShares FactorSelect MSCI Global (NYSEARCA: ACWF ) iShares FactorSelect MSCI International (NYSEARCA: INTF ) iShares FactorSelect MSCI International Small-Cap (NYSEARCA: ISCF ) iShares FactorSelect MSCI USA Small-Cap ( OTC:SMLF ) PowerShares Multi-Strategy Alternative (NASDAQ: LALT ) PowerShares S&P International Developed High Beta (NYSEARCA: IDHB ) PowerShares Wilderhill Progressive Energy (NYSEARCA: PUW ) ProShares Ultra MSCI Brazil Capped (NYSEARCA: UBR ) Recon Capital FTSE 100 ETF (NASDAQ: UK ) RevenueShares ADR (NYSEARCA: RTR ) SPDR MSCI USA Quality Mix (NYSEARCA: QUS ) The 5 ETPs removed from ETF Deathwatch due to improved health: BLDRS Asia 50 ADR (NASDAQ: ADRA ) IQ Hedge Market Neutral Tracker (NYSEARCA: QMN ) ProShares Short Oil & Gas (NYSEARCA: DDG ) ProShares UltraShort Industrials (NYSEARCA: SIJ ) ProShares UltraShort MSCI EAFE (NYSEARCA: EFU ) The 8 ETPs removed from ETF Deathwatch due to delisting: AdvisorShares Pring Turner Business Cycle ( DBIZ ) Global X Brazil Financials (NYSEARCA: BRAF ) Global X Central Asia & Mongolia Index ETF (NYSEARCA: AZIA ) Global X Guru Small Cap Index ETF (NYSEARCA: GURX ) Global X Junior Miners (NYSEARCA: JUNR ) Direxion Daily 7-10 Year Treasury Bull 2x (NYSEARCA: SYTL ) Direxion Daily Basic Materials Bull 3x (NYSEARCA: MATL ) Direxion Daily Mid Cap Bull 2x (NYSEARCA: MDLL ) ETF Deathwatch Archives Disclosure covering writer: No positions in any of the securities mentioned . No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.