The aim of those ETFs is simple: Give investors access to a basket of stocks that frequently appear in the 13F filings of rock star investors. The new Global X Guru Activist Index ETF (NasdaqGS: ACTX), which debuted today, takes the guru ETF concept a step further by focusing on companies where an activist investor, such as Bill Ackman or Carl Icahn, is angling for change.
“ACTX seeks to provide investors with access to 50 of the top equity holdings that are targets of major activist investors. Activists are known to target companies to unlock unrealized value for shareholders by effecting major changes. ACTX follows some of the largest and best-known activists in the world by utilizing publically available information contained in 13F and 13D filings. By investing alongside these activists, ACTX seeks to benefit from their campaigns and potentially generate excess returns over US equity benchmarks, such as the S&P 500,” according to New York-based Global X.
The new ETF tracks the Solactive Guru Activist Index. Index constituents currently include Apple (NasdaqGS: AAPL), Chesapeake Energy (NYSE: CHK) and CVR Energy (NYSE: CVI), all companies where Icahn is looking to affect change. ACTX’s index also includes Ackman holdings, such as Air Products & Chemicals (NYSE: APD), Canadian Pacific Railway (NYSE: CP) and Valeant Pharmaceuticals (NYSE: VRX).
Nelson Peltz’s Trian Fund Management is well represented in the Solactiv Guru Activist Index as DuPont (NYSE: DD), Mondelez (NYSE: MDLZ) and PepsiCo (NYSE: PEP) are each members of the index.
No stock accounts for more than 2.2% of the Global X Guru Activist Index ETF’s weight. Top 10 holdings include Anadarko Petroleum (NYSE: APC), Halliburton (NYSE: HAL), Williams Cos. (NYSE: WMB) and Valeant. [Peltz Pushes for DuPont Breakup]
“The aim of the Solactive Guru Activist Index is to include the target companies of activist investors that tend to take relatively large stakes in a company in order to enforce substantial changes in their corporate strategy. These campaigns are often related to restructuring plans or returning cash to shareholders, among others,” said Solactive head of equity indexing Henning Kahre in a statement.
Typical activist goals include coaxing companies to increase shareholder rewards via expanded buybacks and boosted dividends (think Icahn and Apple) or angling for spin-offs (think Peltz and DuPont). [Expanded Apple Buyback Doesn’t Boost Buyback ETFs]
Activist success jumped last year, with nearly 74% of activist demands being met or partially met, according to Global X data. That is well above the five-year success rate of 67.6%.
Activist Success Rates
Chart Courtesy: Global X
Tom Lydon’s clients own shares of Apple.