Is Starboard Value LP currently targeting Autodesk, Inc. (ADSK)?

We recently published a list of 10 stocks currently being targeted by activist investorsIn this article, we will look at how Norfolk Southern Corporation (NYSE:NSC) compares to other stocks targeted by activist investors.

Activist investors play a major role in implementing various strategies to unlock value in stocks they believe are trading below their fair value. By paying millions and even billions of dollars to buy shares in companies, they gain significant power and the right to lobby for changes they believe will increase stock price and shareholder value. Therefore, it is no surprise that the top 10 stocks currently being targeted by activist investors are also their leadership being targeted to bring about change and thus unlock value.

Last year alone, companies faced a record number of activist campaigns as shareholders sought to exert maximum pressure to oust the boards of companies struggling amid deteriorating macroeconomic conditions. Some activist investors even went so far as to demand the divestment of companies whose share prices had fallen sharply.

As a result, there were 252 activist campaigns worldwide in 2023, a 7% increase from the previous year. The fact that blue-chip companies are now among the top 10 stocks targeted by activist investors underscores that no one is safe from scrutiny.

The significant increase in activist campaigns is due to geopolitical instability and economic uncertainty. However, activist investors ignored these concerns and demonstrated their resilience by pushing for corporate change and operational efficiencies in the race to increase shareholder value.

Likewise, investors are closely monitoring the movements of activist investors in the market as they help uncover some of the most undervalued opportunities worth investigating. A report on 550 activist campaigns has already shown that activist investors often outperform the overall market by 6.3% through their campaigns. Álvaro & Marshal’s report clearly shows why it is so important to closely monitor the movements of activist investors when trying to uncover high-risk, high-reward opportunities in the market.

In addition, activist campaigns that focus on operational demands to change the way companies operate to create value often outperform the market by 9.4% on average. The outperformance is due to activist investors appointing their preferred directors to the board to try to influence the way a company operates to increase shareholder value.

One trend that is becoming increasingly clear is that activist campaigns are becoming increasingly regional and dynamic. As US stocks have outperformed the overall market in recent years, activist investors are increasingly targeting stocks from other regions that have performed worse. As a result, activist investors launched 69 campaigns in Europe last year that focused on mergers and acquisitions. Equities in the Asia-Pacific region were not spared either, as can be seen from the 44 new campaigns.

The story goes on

While the UK saw a 71% increase in activist campaigns to 29 campaigns and the US saw a 20% decrease to 109 campaigns in 2024, Canada saw a 171% increase in shareholder activism to 19 campaigns. Nevertheless, US-based activist investors continue to make up the largest share of global activist campaigns. For example, three of the most active US-based activist investors launched 14% of global activist campaigns.

Over the years, activist campaigns have been dominated by notable hedge funds such as Icahn Enterprises, Jana Partners, and Trian Partners. Elliott Investment Management is one activist hedge fund that stands out for its ability to unlock value in less than two years.

The trend is slowly changing, with new, more aggressive funds pushing to make their mark. For example, last year more than 40% of campaigns were led by hedge funds for the first time, mainly in Europe. The changing of the guard is due to the barriers to entry being lowered, allowing shareholders to launch more campaigns.

It’s one of the best times to watch the 10 stocks currently being targeted by activist investors, as the campaigns are very successful. The double-digit returns achieved by activist investors in 2023 in one of the most challenging environments amid high interest rates underscore the effectiveness of some campaigns.

For example, activist investors pushing for management changes and streamlining operations enjoyed an average return of 20.2% in 2023 – a significant improvement from an average loss of 16% in 2022. Even though the S&P 500 gained 24%, activist investors like Mason Morfit’s ValueAct Capital were the winners with a return of 39%, while Bill Ackman’s holdings in Pershing Square gained 27%. Healthcare hedge fund Caligan Partners posted a gain of 37%, while Engaged Capital led the S&P 500 gain with a gain of 29%.

The activist campaigns capitalized on a rising stock market and focused on some of the most well-known stocks that were on the rise, such as AI-focused Nvidia and cloud computing company Salesforce. The campaigns also proved a big success for the activist investors, who pushed for cost cuts, strategic alternatives and management changes to navigate the high-yield environment.

In the first half of 2024, activist investors launched a record number of campaigns, 147 of which surpassed the previous 143 from 2018. In the second quarter, they launched 86 campaigns, with Elliott Capital investing 11 campaigns and $11 billion in capital to increase its influence on its targets.

The rise of activist campaigns in 2024 threatens to trigger costly power struggles in the boardroom as the activist investor pushes for leadership changes, spin-offs and outright sales.

Our methodology

A closer look at shareholder efforts to capture the most value shows that activist investors have no plans to slow down any time soon. Instead, they’re willing to push companies harder for change, including accelerating board changes, to unlock value. That’s why we’ve compiled a list of recent activist campaigns and ranked them based on their recent market cap. At Insider Monkey, we’re obsessed with the stocks hedge funds invest in. The reason is simple: Our research has shown we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter, and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (more details here).

A software developer uses AutoCAD Civil 3D to create a 3D design in a modern office environment.

Starboard Value LP at Autodesk, Inc. (NASDAQ:ADSK)

Market capitalization: $53.14 billion

Starboard Value investment: $500 million

Autodesk, Inc. (NASDAQ:ADSK) is currently one of the top 10 stocks being targeted by activist investors as Starboard Value continues to face pressure following a $500 million stock purchase. With the investment, the activist investor is pushing for change at the design software maker as he believes Autodesk, Inc. (NASDAQ:ADSK) has what it takes to improve its margins.

The activist hedge fund is pushing for changes in the board of directors and has also held discussions with management to discuss ways to improve operations and corporate governance. The investor has also criticized management for its recent handling and disclosure of internal investigations that led to the firing of the chief financial officer. The activist investor believes that changes in management could help improve margins and investor relations, thereby increasing the value of Autodesk, Inc. (NASDAQ:ADSK).

Total ADSK 4th place on our list of stocks currently being targeted by activist investors. You can visit 10 stocks currently being targeted by activist investors to see the other stocks that are on hedge funds’ radar. While we recognize ADSK’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than ADSK but trades at less than 5x earnings, read our report on the cheapest AI stock.

READ MORE: 20 countries with the highest purchasing power parity in the world in 2024 and 10 high-dividend stocks with very high yield and upside potential.

Disclosure: None. This article was originally published on Insider Monkey.