FA Center: The surprisingly simple way to profit from shareholder activism

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CHAPEL HILL, N.C. (MarketWatch) — Should you take shareholder activism into account when picking investments? The answer is “yes.” The most reliable way to do it, however, might surprise you.

Shareholder activism is as old as the corporate form of business organization: Shareholders are owners, and can try to influence a corporation’s behavior either by persuading management to do things differently or, if management refuses to make changes, by garnering enough support from other investors to win a proxy contest.

Activists typically target companies whose shares have been performing poorly, proposing actions — from breaking the company into smaller companies to firing executives and changing up the board of directors — that they believe will unlock value.

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