The market is proving to be a fertile ground for activist investors, and it seems that restaurant stocks are becoming the latest target.
While the S&P 500 index has experienced a 19.3% climb this year, much of the focus has been on a select few tech companies. This lack of diversity poses a challenge for the average investor, but it presents an opportunity for activists to thrive.
According to Jeff Smith, CEO of Starboard Value, “This is a stockpickers’ market.” Speaking on CNBC, he emphasized the importance of careful selection in this kind of market.
Although Starboard Value currently has investments in Salesforce (CRM) and Algonquin Power & Utilities (AQN), Smith hinted that his attention might soon shift back to the restaurant industry. He believes there are promising opportunities in this sector, which has faced significant fluctuations and may have been undervalued.
Restaurants have often been targeted by activists, as highlighted by Don Bilson, head of event-driven research at Gordon Haskett. Recent data from Visa (V) and Mastercard (MA) indicates that consumers still have a strong desire to dine out, but the restaurant business is struggling to adapt to the post-Covid economy.
In the past, Jeff Smith has gained recognition for advocating changes at Olive Garden parent company Darden Restaurants (DRI) and Papa John’s International (PZZA). It appears that he may now be gearing up for another round of activism in this sector.
The restaurant market is becoming a prime arena for activist investors, and Jeff Smith seems poised to take advantage of it once again.