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(B)(N) Lights, Camera, Activist!

February 14, 2017
tent-smoke

Lights, Camera, Activist!

Drama. There’s a New Wave of activist shareholders fighting for their rights – excuse me, for our rights, they say – but the main result is to put some new directors on the Board and in the “tent”, as they call it, and to increase the burn rate of the incumbent CEOs in hundreds of companies that we’ve mostly never heard of before (The Street, February 11, 2017, There Is a Wave of First-Time Activist Investors Descending on Corporate America and Bloomberg, February 1, 2017, It’s Getting Harder to Keep the Barbarians at the Gate—and It’s This Guy’s Job)

But contrary to what you’ve heard, shareholders don’t have any “rights” in practice and companies don’t need to be well run by any standard nor do they need to share their earnings with us or pay dividends or do anything to boost their stock price.

But despite that, the proxy battles are becoming more heated as passive investors plough more of their money into ETFs and mutual funds which are run by just a few companies – marketing giants such as BlackRock, Vanguard, and Fidelity for example – and about 40% of the common stock of the S&P 500 companies (worth about $20 trillion) is now owned by just twenty-five of these “mega-investors” (ibid Bloomberg) who earn their money from the stocks that they bought with your money at your risk and from you – and the players have done quite well but the played not so much.

And, suddenly, companies (which most of us have never heard of before, as above) are showing-up on the casting couch for an encore in everybody’s portfolio post-IPO and oftentimes it’s just because they’re small with a small market capitalization that makes them look like good targets with a little money down even if they’re just minding their own business and doing good for their employees and the community that they’re in.

But, fortunately, our approach to increasing shareholder value is more direct and we don’t need a “tent” or to camp-out on somebody’s doorstep and by playing these players, we’ve earned an average of +56% a year for the past five years with no risk at all.

tent-smoked

The right answer to the wrong questions.

And it’s also a win-win situation for the shareholders – if the activists are good, we win, and if the activists are bad, we win too and even more if they’re left holding the bag in their ruined “tent” as in, for example, HerbalifeValeant Pharmaceuticals or CP Rail and, right now, the short portfolio is big in our numbers and we’re also playing the long portfolio for as long as it lasts; please see below for more details (and click on the charts and again to make them larger as required).

Lights, Camera, Activist!

exhibit-1-lights-camera-activist-cash-flow-summary

tgx-ally-ally-financial-incorporated

Figure 1.1: ALLY Ally Financial Incorporated (B+)

tgx-aapl-apple-incorporated

Figure 1.2: AAPL Apple Incorporated (B+)

tgx-cp-canadian-pacific-railway-limited

Figure 1.3: CP Canadian Pacific Railway Limited (B+)

tgx-clf-cliffs-natural-resources

Figure 1.4: CLF Cliffs Natural Resources (B+)

tgx-csx-csx-corporation

Figure 1.5: CSX CSX Corporation (B+)

tgx-evr-evercore-partners-incorporated-class-a

Figure 1.6: EVR Evercore Partners Incorporated Class A (B+)

tgx-fnma-fannie-mae

Figure 1.7: FNMA Fannie Mae (B+)

tgx-ghl-greenhill-company-incorporated

Figure 1.8: GHL Greenhill & Company Incorporated (B+)

tgx-hele-helen-of-troy-limited

Figure 1.9: HELE Helen of Troy Limited (B+)

tgx-hlf-herbalife-limited

Figure 1.10: HLF Herbalife Limited (B+)

tgx-jcp-j-c-penney-company-incorporated

Figure 1.11: JCP J.C. Penney Company Incorporated (N)-Class

tgx-ldr-landauer-incorporated

Figure 1.12: LDR Landauer Incorporated (B+)

tgx-laz-lazard-limited-class-a

Figure 1.13: LAZ Lazard Limited Class A (B+)

tgx-lm-legg-mason-incorporated

Figure 1.14: LM Legg Mason Incorporated (B+)

tgx-lc-lendingclub-corporation

Figure 1.15: LC LendingClub Corporation (B+)

tgx-seas-seaworld-entertainement-incorporated

Figure 1.16: SEAS SeaWorld Entertainment Incorporated (B+)

tgx-sne-sony-corporation-ads

Figure 1.17: SNE Sony Corporation ADS (B+)

tgx-bid-sohtebys-class-a

Figure 1.18: BID Sotheby’s Class A (B+)

tgx-utek-ultratech-incorporated

Figure 1.19: UTEK Ultratech Incorporated (B+)

tgx-ual-united-continental-holdings-incorporated

Figure 1.20: UAL United Continental Holdings Incorporated (B+)

tgx-vrx-valeant-pharmaceuticals-international-incorporated

Figure 1.21: VRX Valeant Pharmaceuticals International Incorporated (B+)

For more examples of the (B)-class portfolio in difficult markets, please see our recent Posts on”The “W” Syndrome“, Steel,  Green Energy, UFOs and the High Flying Techs, and The Coal War which is heating-up again now; and the Canadian Mines have also taken-off – please see our recent Post “(B)(N) Extreme Economics – The (New) Canadian Mines” for a heads-up on that as well as The Great Rotation & Twenty Hot Canadians 2017.

And for more information and examples of the Free Market Yield and the terms that we have used above, please see our Posts “(P&I) The Dismal Equation (Ecclesiastes 9:1)” and “(B)(N) S&P 100 Volatility Risk and The Full Moon” and “(B)(N) NASDAQ 100 Volatility and The Stone Bunnies“ and for an introduction to The Barometer “(B)(N) What’s A Girl To Do” or “(P&I) The Swiss Franc Debacle“.

And for more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And for more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in AmericaBig OilShopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”). The Canada Pension Bond®™, The Medina Bond®™, The Barometer®™, the Free Market Yield®™ and Extreme Economics®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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