5 Large Caps In Activist Cross-Hairs
By Special Situations Monitor: It pays to follow activist targets because, by paying attention to this area, you are likely to come across value stocks wrapped in a catalyst. A few things to consider in activist investing:
- Not to jump in right away when a well-known activist investor discloses a large position in a stock along with a list of demands. Typically these filings are immediately followed by a spike in the stock price, most likely due to short-covering or from excited short-term traders stampeding into the name. More often than not, these stocks subsequently decline in price when the initial buzz subsides and investors take easy profits.
- Is there is plenty of time to do one's homework to figure out whether the activist's demands make sense or not?
- Look at the activist's past track record. For example, and I will not name names, one very well-known octogenarian activist has a habit of making