Hedge funds are targeting gigantic companies

Akhtar Soomro/ReutersResidents gather as a whale shark is pulled from the water by cranes after it was found dead at Karachi’s fish harbor February 7, 2012.

The sharks are going after bigger prey.

Hedge funds big and small are taking on larger targets in their activist campaigns, according to data from FactSet.

The number of campaigns to shake up organizational structures of large- or mega-cap companies has taken off in recent years wrote Andrew Birstingl.

“Macy’s, Qualcomm, and AIG. What do these companies have in common? Each of them is a large and well-established firm that has been the target of an activist campaign in the past year,” he said in a note to clients.

“These three examples of activist investors targeting larger and well-known companies are not anomalies. This is a growing trend within the shareholder activism space.”

According to Birstingl’s data, there were 30 activist campaigns launched against companies with a market cap larger than $10 billion in 2015, 8% of all activist moves. This is a serious jump from just a few years ago, in 2009 there were only 6 such campaigns which was 2.6% of the total.

FactSet

Additionally, as measured by average market cap, the jump in activists targeting massive firms is even more apparent.

“The average market value of companies targeted by activist investors is significantly higher than it was several years ago,” said Birstingl. “The average market value of the firms involved in the 262 activist campaigns in 2012 was $2.7 billion. In 2015, the average market cap of targeted companies was $4.7 billion, 73% higher than the 2012 value.”

Birstingl did note that activist campaigns were launched against Apple in 2013 and 2014, skewing their data, but stripping out those moves shows the data has been steadily increasing since 2013.

FactSet

Birstingl noted that even small hedge funds are getting in on the act such as SpringOwl Asset Management going after Viacom and Altimeter Capital Management going after United Continental airlines.

With all the activism, Birstingl said, even companies that would seem safe have become targets.

“Even if a company’s stock is performing well, the firm is still susceptible to an activist investor knocking on the door,” said the note.

“Of the activist campaigns since 2008, 38% of the target companies’ stocks were up in the last year leading up to the campaign announcement date, and 29% of the target companies’ stocks were up more than 10%. These numbers are even higher for mega- and large-cap firms.”

So to recap: hedge fund activists of all sizes are unceasingly going after gigantic firms whether or not the company’s stock is doing well.

Activism, everybody’s doing it.