- “Mad Money” host Jim Cramer opines on activist investors using three distinct, high-profile cases currently underway on Wall Street.
- From Procter & Gamble to General Electric to Arconic, Cramer says that activist investing usually garners favorable results for shareholders.
- But not all proxy fights work out in the activists’ favor.
“This is very much a case-by-case thing,” the “Mad Money” host said. “There are some ‘scorched earth’ activists who seem to specialize in creating ill will and not much else. But you know what? I think those days are largely behind us, at least when it comes to smart activists who know what they’re doing.”
1. Procter & Gamble
Procter & Gamble’s shareholders voted against Peltz’s bid to join the board of directors of the consumer goods giant on Tuesday. The company declared victory before the vote was officially finalized. Peltz said it was a “dead heat.”
One of Cramer’s favorite companies, Procter & Gamble boasts leading household brands like Tide, Febreze and Gillette. Cramer said management seemed to have lost its way between 2010 and 2015, giving Peltz an opening to step in and push company-wide changes.
But then Procter & Gamble elected longtime employee David Taylor as chairman, president and CEO. Taylor started to cut costs and push research and development initiatives.
While Cramer said Taylor’s strategy hasn’t been perfect, it helped the company climb out of its five-year rut. But Peltz, backed by his firm, Trian Partners, insisted there was more to be done.
In a 94-page white paper, Peltz publicly called for more accountability among Procter & Gamble’s executives and more brand initiatives, requesting a seat on the company’s board.
Procter & Gamble pushed back, taking aim at Peltz’s tenure at other consumer goods companies. Taylor called Peltz’s proposals “very dangerous” for the company in the short and long term, adding that management had already made many of Peltz’s suggested changes.
Still, Procter & Gamble’s stock stayed intact, an effect Cramer attributed to the heat of the proxy battle. As shares declined in the wake of the vote, Cramer surmised that they would have been rising had Peltz won.
“All that said, the biggest winners here [are] you, the shareholders. Any spur from outside that creates more accountability is always going to be a good thing,” Cramer said. “I like that kind of challenge. I feel comfortable enough in my skin to have one, though obviously the board of directors didn’t. Still, they would’ve been better off with him than without him.”