Bill Nygren: Avoid Activist Investments

In his latest Q2-2021 Market Commentary, Bill Nygren says investors should avoid activist investments and invest only in those companies that are already well-managed. Here’s an excerpt from the commentary:

Some investors like to buy shares in companies that are not maximizing long-term value and then fight for change. We would rather avoid poorly run businesses and invest only in those that are already well-managed. Experience has taught us that bad management teams can destroy a lot of value while “activist investors” push for change.

We don’t often have to vote against management in proxy contests because we voted “no” by avoiding the bad factors in the first place. When we disagree with strategic decisions our managements make, we first engage with them privately. Then if we are not satisfied, we escalate to private engagement with the board.

After that, if we still believe management is doing the wrong thing, we typically sell the stock and move on. In rare cases when we conclude management is acting against our interests and the stock appears much more undervalued than alternative investments, we will maintain our investment and be public about our desire to replace management.

You can read the entire commentary here:

Bill Nygren Q2-2021 Market Commentary