Activist investors have been giving companies a hard time lately, accumulating large blocks of stock as a way of forcing their way onto corporate boards, and often forcing companies to “raise shareholder value” through spin-offs and special dividends as their price to go away. Just this week, DuPont defeated activist investor Nelson Peltz, and his Trian Fund Management, L.P.
Some consultants even advise corporations to settle with activist investors early, rather than trying to fight them.
Is Berkshire Hathaway vulnerable to what used to be called “greenmail”?
Not according to Warren Buffett and Charlie Munger. They both scoffed at the idea while answering questions at the Berkshire Hathaway annual meeting on May 2, 2015.
As Buffett sees it, at a valuation of over a third of a trillion dollars, Berkshire is too big to be threatened by activist investors.
“The market value of Berkshire is going to be so great that, even if all the activists got together, they couldn’t do much about it,” Buffett explained. He added that he would invite them in, as their attempts to attack Berkshire would merely drive up the stock price.
“We should be a place where people dump their activists, because there not going to get anywhere,” Buffett said wryly.
While activist investors bill themselves as needed financial warriors that shake up hidebound companies to unlock value for all shareholders, Charlie Munger wasn’t having any of it.
“I don’t think it’s a great age, this age of activism,” Munger said. “It’s hard for me to think of many activists I want to marry into the family.”
© 2015 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.