Activist investors target companies where they can engage with management and directors to unlock shareholder value. Not to be confused with old style green mailers or corporate raiders, activist investors will usually stay in their target companies for the longer term. As a general rule any outstanding financial, governance and strategic issues are tackled before agreed operational improvements are implemented.
Although well established in the US and now spreading to Europe and Japan, specialised listed activist investment companies have been largely non–existent in Australia. And now, quite suddenly, we have two.
Founded by Gabriel Radzyminski Sandon Capital Investments Limited (ASX: SNC) listed on the ASX late last year. Early shareholders include astute investors such as Rob Ferguson (Bentham IMF) and Geoff Wilson (Wilson Asset Management). One difficulty with buying into investment companies is that you're essentially investing in the talents of the decision maker.
On this note, the following extract from The Australian Financial Review is interesting: "Geoff Wilson's Wilson Asset Management is one of Sandon's most enthusiastic supporters. Sandon has acted as an adviser and co-investor to Wilson in several situations, including Australian Infrastructure Fund, RHG Group, Alesco and Premium Investors. Mr Wilson said he intends to personally invest $1 million in Sandon."
For further corroboration the unlisted Sandon Activist Capital Fund returned 14.3%pa over the period 2009 -2013.
Trading around 94c Sandon Capital is selling at net tangible asset backing and looks to have a rewarding future – however investors should be a little patient as Sandon will take as much time as is necessary to build the portfolio (13% invested so far).
Another recently listed activist investor is the Melbourne-based Thorney Opportunities Limited (ASX: TOP) which recently took a significant position in the beleaguered Service Stream Limited (ASX: SSM). TOP is an offshoot of the well established Thorney Investment Group. Thorney Opportunities is likely to have a different profile to Sandon Capital, given the tie in with a large parent. CEO Alex Waislitz has a well deserved reputation as a highly astute investor, evidenced by the performance of Thorney Investment Group over many years.
Trading at 56c, Thorney Opportunities is selling at an 18% premium to net tangible asset backing.
Foolish takeaway
As activist investors buy into problem companies a different mindset is needed when assessing their prospects. With Sandon Capital and Thorney Opportunities being new to the ASX you have to rely on the unlisted record of the key individuals – Gabriel Radzyminski (Sandon) and Alex Waislitz (Thorney). No problems there – both are extremely experienced at liaising with target companies to implement improvements.
Another attraction is that activists are neither bull nor bear, and returns are not correlated to general market cycles. In my view an investment in activist managers is a plus for any portfolio.
