Sunday Morning Coffee

Barron's had a short article about Carl Icahn's recent involvement with the attempted Dell (DELL) buyout. As you may know the deal is drawing a lot of criticism because it seems to significantly undervalue the company on a sum of the parts basis. Presumably Icahn believes his involvement can extract more value than what is on the table now and he is hoping to participate in that.

This represents a form of activist investing. This is a term that many of us have heard and like any form of investing sometimes it works out well but sometimes it doesn't. David Einhorn might be doing a little bit of activist investing in his attempts to get Apple (AAPL) to create a preferred stock.

I'm not big on activist investing. That is not to say I am against it but it not something a little RIA firm like us can do. We would have to put the entire firm's AUM into a smaller small cap company to have a shot of dictating how a CEO or the board or other decision maker runs the company. To be clear this is not something we are going to do.

In the process of running RRGR we have to keep track of how we vote on proxies for the companies we own. I was talking about this a few months ago with one of my colleagues and said that if I disagreed with what management was doing we would just sell the stock. Case in point being Bank of America in 2008. Its takeover of Merrill Lynch was clearly and obviously (to me anyway) a bad idea so we sold it a day or two after the announcement was made.

Activist investing is outside my wheelhouse or maybe it would be better to say beyond our means. To the extent you can realize what type of investing you should not do, you will be better off. To be clear about one other thing, we monitor what the companies we own do. We simply choose to sell when we disagree with the company, we don't stick around for the fight.

The picture is of a 1949 Delahaye. Barry Ritholtz had a post with pictures of a half dozen different Delahayes. Definitely worth clicking through to.