Activist investors offer a lot of benefits, to businesses in the long term, and to careful shareholders. Studies have shown that over time, stocks of businesses targeted by activist investors do tend to rise.
One of the drawbacks initially could be that the companies being targeted are not generally in good shape. Activist investors, by definition, go for companies that are not doing well, gaining a position of influence either as shareholders or on the board of directors, to get more say in how the company should be run. This helps improve the prospects of the company, and is seen in a positive context.
Why it is still worth it
On the plus side the activist investor brings to the table good research, so that the stocks are chosen carefully. This is good news for investors, because the activist investor has stakes in the investment. This means, there is less risk of being made to buy stocks that the activist themselves do not trust.
That said, to profit from activist investor’s path, you would need to show a lot of patience and wait for the stocks to rise. As with all investments, there are some risks, but these are minimized due to the research and effort put in by activist investors, who want the best for investors and would personally want the shares to do well.
Bild: bigstockphoto.com / Phongphan