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Aug. 14, 2019, 10:08 a.m. EDT

These five U.S. stocks are most vulnerable to an activist attack

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By Callum Keown


Bloomberg
Activist investors could target Grubhub in a bid to boost earnings in an increasingly competitive food delivery sector

Food-delivery firm Grubhub, industrial heavyweight 3M and consumer-products giant Colgate-Palmolive are all vulnerable targets for activist investors, according to the shareholder-activism intelligence firm Activist Insight.

That trio, along with software company Autodesk /zigman2/quotes/209828392/composite ADSK +1.42% and dental-equipment manufacturer Dentsply Sirona /zigman2/quotes/204544124/composite XRAY +0.36% , have been identified as possible activism targets in a report for MarketWatch by the research firm.

The firm, which analyses financial data, corporate governance and shareholder registers of companies to determine whether they are vulnerable to becoming activist targets, has produced a 10-strong list. The results are compared to peers and broad indexes, such as the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.40%  , and analysts provide extra context relating to the sector.

MarketWatch will reveal the remaining five in the coming days.

Typically when an activist investor gets involved, a stock soars. In 2018 Activist Insight highlighted 76 companies under threat; of those 16 have since been targeted by an activist, including Papa John’s /zigman2/quotes/207343722/composite PZZA +1.49% .

The pizza company took a $200 million investment from Starboard Value earlier this year and made the activist hedge fund’s chief executive its chairman.

It also predicted that eBay /zigman2/quotes/204653455/composite EBAY +0.93% would come under pressure, as it has from Starboard and fellow activist Elliott — founded by billionaire hedge-fund manager Paul Singer — eventually agreeing to a strategic review.

The first five U.S. companies identified by Activist Insight as vulnerable to shareholder activism using the proprietary tool Activist Insight Vulnerability and in-house analysis, are:

3M

After a slow start to 2019, the industrial conglomerate /zigman2/quotes/205029460/composite MMM +0.37% restructured its business from five units into four — health care, consumer, transportation and electronics, and safety and industrial.

The company, whose stock is a component of the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.35% ,  slashed its full-year guidance by 11% in April, and its stock suffered a double-digit one-day loss.

Shares have fallen 12.5% over the course of the year, and over the past five years its total shareholder return of 40% sits well below the 129% of a median peer.

Activist shareholders could push for the company to separate its four business segments into two or three companies. A shift to focus on health care and consumer, ditching industrial and transportation units, could help reduce debt.

See also: 3M’s business model is broken, analyst says

3M declined to comment.

Dentsply Sirona

Since the merger between Dentsply and Sirona at the beginning of 2016, the combined dental giant has suffered losses and struggled to generate revenue growth.

Total shareholder return of 20% over the past five years, against 129% for the company’s median peer, leave the company exposed to activism.

Occasional activist Artisan Partners holds a 7% stake in the company.

The dental-equipment manufacturer unveiled a restructuring plan in November — including cost reductions and job cuts — with its chief executive, Don Casey. acknowledging a disappointing 2018.

Last month the dental equipment manufacturer beat earnings expectations with its second-quarter results.

/zigman2/quotes/209828392/composite
US : U.S.: Nasdaq
$ 153.26
+2.15 +1.42%
Volume: 297,608
Sept. 19, 2019 11:44a
P/E Ratio
606.37
Dividend Yield
N/A
Market Cap
$33.18 billion
Rev. per Employee
$292,023
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/zigman2/quotes/204544124/composite
US : U.S.: Nasdaq
$ 50.04
+0.18 +0.36%
Volume: 405,053
Sept. 19, 2019 11:44a
P/E Ratio
106.34
Dividend Yield
0.80%
Market Cap
$11.18 billion
Rev. per Employee
$243,067
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,018.72
+11.99 +0.40%
Volume: 479.59M
Sept. 19, 2019 11:44a
loading...
/zigman2/quotes/207343722/composite
US : U.S.: Nasdaq
$ 52.74
+0.77 +1.49%
Volume: 162,469
Sept. 19, 2019 11:44a
P/E Ratio
N/A
Dividend Yield
1.71%
Market Cap
$1.65 billion
Rev. per Employee
$87,407
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/zigman2/quotes/204653455/composite
US : U.S.: Nasdaq
$ 40.74
+0.37 +0.93%
Volume: 1.05M
Sept. 19, 2019 11:44a
P/E Ratio
15.93
Dividend Yield
1.37%
Market Cap
$33.85 billion
Rev. per Employee
$768,143
loading...
/zigman2/quotes/205029460/composite
US : U.S.: NYSE
$ 168.06
+0.62 +0.37%
Volume: 473,184
Sept. 19, 2019 11:44a
P/E Ratio
20.29
Dividend Yield
3.43%
Market Cap
$96.32 billion
Rev. per Employee
$350,368
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,241.21
+94.13 +0.35%
Volume: 73.58M
Sept. 19, 2019 11:44a
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