Starboard Value's Jeff Smith hinted that he is looking at restaurants as his next target.
DreamstimeIt’s turning out to be a ripe market for activist investors, and restaurant stocks appear to be on the menu.
While the S&P 500 index has climbed 19.3% this year, much of the momentum, at least in the earlier part of the year, was focused on a handful of tech names. While a lack of breadth may be challenging for the average investor, it’s precisely the type of market that activists thrive on.
“From our standpoint as stockpickers, this is a stockpickers’ market,” said Jeff Smith, CEO of Starboard Value, on CNBC this past Tuesday.
While the activist currently has investments in Salesforce (ticker: CRM) and Algonquin Power & Utilities (AQN), he may soon be turning his focus to an area that first brought his hedge fund acclaim: restaurants.
“We do think there are good opportunities in the restaurant space….The restaurant space in general can be cheap and may have overreacted,” Smith said, declining to elaborate further to both CNBC and Barron’s.
Restaurants are a popular area for activists, with many at one point or another finding themselves in activist crosshairs, notes Don Bilson, head of event-driven research at Gordon Haskett. Customers seem intent on continuing to dine out, according to recent data from Visa (V) and Mastercard (MA), but the restaurant business is still adjusting to the post-Covid economy.
Smith, for his part, memorably was known for pushing for changes at Olive Garden parent Darden Restaurants (DRI) and Papa John’s International (PZZA).
It’s looking like he may be ready for a second helping.
