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Over the past decade, activist-run funds have returned nearly 267% – more than double that of the Standard & Poor's 500 index.
What many don't realize is that figuring out how to profit from the lucrative moves of these activist investors is easier than it looks.
And it's a way for retail investors to participate in a trend that continues to accelerate.
Activist Investors Rake in Record Profits
Last year, activist investors targeted 369 companies, a 12% increase over 2012. But activist investors are on pace to target about 440 companies this year – a 19% increase over 2013.
And even that could be a conservative estimate. The Wall Street Journal recently reported that many of the top activist investors have been stockpiling cash.
Daniel Loeb's Third Point LLC raised a jaw-dropping $2.5 billion in just two weeks in August, the Journal reported, with Nelson Peltz's Trian Fund Management LP, Ackman's Pershing Square Capital Management, and Barry Rosenstein's Jana Partners also loading up their war chests.
That means not only will we see more activist investor targets, but more high-profile targets.
Just within the past month, Carl Icahn won three board seats at Hertz Global Holdings Inc. (NYSE: HTZ), and Rosenstein snagged two board seats at Walgreen Co. (NYSE: WAG). Of course, Icahn also pushed Apple Inc. (Nasdaq: AAPL) last year to pay a bigger dividend and buy back stock.
Meanwhile, Peltz has turned up the heat in his campaign to drive E. I. Du Pont De Nemours and Co. (NYSE: DD) to break up.
Historically, retail investors have struggled to profit from these moves, because by the time they become public, the targeted stocks have already jumped higher.
But there are ways for retail investors to piggyback on the successes of the activist investors…
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.