Long Term Returns of Jeff Smith’s Activist Targets

Swati Goyal
22 min read

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In this article, we discuss long-term returns of Jeff Smith's activist targets. If you want to see more stocks in this selection, check out Long Term Returns of Jeff Smith's 5 Activist Targets.

Once dubbed as one of the most feared men in corporate America, Jeff Smith is one of the most respected personalities when it comes to activist investment. He has been making waves since forming Starboard Value in 2002 and helping steer the hedge fund to becoming one of the biggest and most followed. The hedge fund has overseen more than 100 activist campaigns tailored to maximizing shareholder value.

Smith has risen to become one of the most revered activist investors thanks to his keen eye for detecting unrealized company potential. His strategy is simple as it involves building stakes in undervalued companies and pushing for management changes, sale of units, or company improvement in capital utilization in the race to unlock value.

In most cases, the activist investor collaborates with management to get them to perform better and focus on core business instead of launching a proxy battle. Smith's impressive record is depicted by the fact that 80% of Starboard Activist campaigns are profitable.

The hedge fund also delivered average annualized returns of over 15% through 2014 from inception. Therefore, following the activist investor's plays on Wall Street usually pays out. The hedge fund has registered 37% portfolio gains since 2013 and delivered a 3.82% average return over the past three years.

The economics graduate from the Wharton School of the University of Pennsylvania is best remembered for steering a campaign that resulted in the ousting of the entire board of Darden Restaurants. Before ousting the board, the activist investor had filed hundreds of documents showcasing how management could improve earnings and garner more value from corporate assets.

Within the short period of ousting the entire Darden's board, the new management achieved a $100 million annualized cost savings. In the next two years, the activist investor would play a pivotal role, resulting in a 40% increase in the company's market value.

Long Term Returns of Jeff Smith's Activist Targets

Smith also sought to turn around the fortunes of struggling Pizza chain Papa John's, taking a stake in the company and becoming the chairman in 2019. He was given two seats on the board. The company's stock jumped by 9.9% as investors remained optimistic about the activist investor's ability to reinvigorate the pizza chain delivery fortunes,

The billionaire investor has also run campaigns in eBay where he pushed to have the company divest some units and return the proceeds to investors through buybacks and dividends. The campaigns suggest that activist campaigns tend to have positive long-term returns after interventions, considering that eBay shares rallied by more than 90% following the transaction.

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