Based

Crown

Castle

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 Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our&nbsp;<a href="https://tokenist.com/terms-of-service/" style="text-decoration:underline;color:#3c7b7b" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">website policy</a>&nbsp;prior to making financial decisions.
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<p class="has-drop-cap">This year hasn’t been good for ESG-focused investors. The environmental, social, and governance (ESG) framework filters companies beyond their profitability baseline. Yet, more <a href="https://tokenist.com/over-20-esg-funds-shut-down-in-2023-amid-fading-interest/" rel="noopener noreferrer nofollow" class="deco-link">ESG funds closed</a> in 2023 than in previous years.&nbsp;</p>
<p>In June, ESG’s foremost promoter and facilitator, BlackRock’s CEO Larry Fink, noted that the catch-all term has become “entirely weaponized.” At the same time, such investment filtering doesn’t rely on labels.</p>
<p>Investors still need accurate reporting to make activist decisions. The ESG reporting software market is still poised for a 21.30% compound annual growth rate (CAGR) between 2022 and 2027, up to <a aria-label=" (opens in a new tab)" href="https://www.globenewswire.com/news-release/2023/10/25/2766764/0/en/The-Environmental-Social-And-Governance-ESG-Reporting-Software-Market-Is-Expected-To-Reach-1-73-Billion-By-2027-As-Per-The-Business-Research-Company-s-Environmental-Social-And-Gove.html" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">$1.73 billion</a>. In this space, activist investing has become more prevalent.</p>
<p>Focusing on the G part of <a href="https://tokenist.com/investing/what-is-socially-responsible-investing/" rel="noopener noreferrer nofollow" class="deco-link">ESG</a>, activist investors aim to gain a larger stake to direct the company in their desired direction. Which three stocks have received such targeting and why?</p>
<h3 id="crown-castle-inc-nyse-cci">Crown Castle Inc. (NYSE: CCI)</h3>
<p>In 2020, activist investor Elliott Investment Management said it was displeased with Crown Castle’s corporate governance. The company provides real estate infrastructure for the bulk of the US wireless carriers. Valued at $71.5 billion as of Q2’23, Crown Castle operates over 40,000 cell towers and over 85,000 miles of fiber cable.&nbsp;</p>
<p>At the end of this November, Elliott submitted a Section 220 demand on Crown Castle to inspect the company’s bookkeeping, with a $2 billion stake in tow. <a aria-label=" (opens in a new tab)" href="https://www.prnewswire.com/news-releases/elliott-sends-220-demand-and-letter-to-the-board-of-crown-castle-inc-301999809.html" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">Elliott alleges</a> that Crown Castle’s Board violated shareholders’ fiduciary duty by instituting amendments that had the effect of stifling:</p>
<blockquote class="wp-block-quote">
 <p>“even the most basic forms of shareholder communication and at the very least were designed to weaken the shareholder franchise,”</p>
 <p>Jesse Cohn, Elliott Investment Management partner, together with Jason Genrich, senior portfolio manager, on November 28th</p>
</blockquote>
<p>If Elliott’s Section 220 leads to an actionable lawsuit leading to Crown Castle’s board restructuring, CCI shareholders could benefit from intercepted “disenfranchising.” As of June 2023, Elliott Investment Management holds $59.2 billion in assets, returning on average 4.9% since 2018 across 76 activist stock positions.</p>
<p>At the same time, Crown Castle’s business model and leading infrastructure role in communications have yielded a consistent return on investment (ROI), standing at <a aria-label=" (opens in a new tab)" href="https://www.macrotrends.net/stocks/charts/CCI/crown-castle/roi" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">5.43%</a> as of September.</p>
<p>Based on 19 analyst inputs pulled by Nasdaq, CCI stock is a “buy.” CCI shares jumped 20% over the last month following Elliott’s engagement. The average CCI price target is $106.27 vs current $117.93. The high estimate is $126, while the low forecast is $90 per share.</p>
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<h3 id="phillips-66-nyse-psx">Phillips 66 (NYSE: PSX)</h3>
<p>Over the last three years, up to November, Phillips 66 reported over 150% shareholder returns. The global company offers energy manufacturing and logistics, ranging from crude oil/natural gas pipelines to petrochemicals and fuel refinement. Similar to CCI, PSX shares jumped 14% over the month.</p>
<p>In the <a aria-label=" (opens in a new tab)" href="https://investor.phillips66.com/financial-information/news-releases/news-release-details/2023/Phillips-66-Reports-Third-Quarter-2023-Financial-Results-and-Update-to-Strategic-Priorities/default.aspx" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">Q3 earnings report</a>, Phillips reported a $1.2 billion return to shareholders via stock buybacks and dividends. The goal was to return at least 50% of operating cash flow to shareholders. Yet, with a raised $1 billion PSX stake, Elliott Investment Management is pushing for two board seats.&nbsp;</p>
<p><a aria-label=" (opens in a new tab)" href="https://www.prnewswire.com/news-releases/elliott-sends-letter-to-the-board-of-phillips-66-302000704.html" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">Elliott’s goal</a> is to boost Phillips 66 refinery performance, potentially increasing PSX shares by 75%.&nbsp;</p>
<blockquote class="wp-block-quote">
 <p>“…we believe the Board must take several steps to reassure investors that Phillips 66 is in the best possible position to achieve its value-creation potential.”</p>
 <p>John Pike, Elliott’s partner, alongside portfolio manager Mike Tomkins, on November 29th</p>
</blockquote>
<p>Elliott referred to its <a href="https://tokenist.com/investing/what-is-impact-investing/" rel="noopener noreferrer nofollow" class="deco-link">activist impact</a> on Marathon Petroleum (MPC) since 2019, having the company outperform its peers by ~200%. With a similar impact on PSX, Elliott argues that new governance would generate $15 billion – $20 billion after-tax cash following the sale of the company’s CPChem stake alongside streamlining other assets.</p>
<p>Based on 19 analysts pulled by Nasdaq, PSX stock is a “strong buy.” The average PSX price target is $133.2 vs the current $130. The high estimate is $150, while the low forecast is $116 per share.&nbsp;</p> <iframe src="https://tokenist.substack.com/embed" width="100%" height="320" style="border:1px solid #EEE; background:white;" frameborder="0" scrolling="no"></iframe>
<h3 id="the-goodyear-tire-rubber-company-nasdaq-gt">The Goodyear Tire &amp; Rubber Company (NASDAQ: GT)</h3>
<p>Following CCI and PSX, GT shares received a 20% boost over the last month. This American multinational is a tire manufacturing icon, founded at the end of the 19th century. Elliott began its <a href="https://www.prnewswire.com/news-releases/elliott-sends-letter-and-presentation-to-the-board-of-goodyear-301822226.html" target="_blank" aria-label=" (opens in a new tab)" rel="noopener noreferrer nofollow" class="deco-link">activist push</a> this May, claiming that five new highly qualified independent directors to the Board would improve the company’s performance and subsequent GT performance.</p>
<p>More precisely, Goodyear failed to monetize its trapped value across its store network properly.&nbsp;</p>
<blockquote class="wp-block-quote">
 <p>“Relative to the S&amp;P 400, Goodyear has underperformed by 90% over the past five years and 143% over the past ten years. Relative to proxy peers, key competitors and relevant indices such as the Dow Auto Parts Index, the story of underperformance is similar.”</p>
 <p>Marc Steinberg, Elliott’s senior portfolio manager, alongside portfolio manager Austin Camporin, on May 11th</p>
</blockquote>
<p>With Elliott’s plan to reduce the company’s leverage and accelerate growth, the company could start generating over $16 per share. On November 15th, Goodyear CEO Richard Kramer resigned to settle with Elliott’s activist investing push.&nbsp;</p>
<p>In November’s <a aria-label=" (opens in a new tab)" href="https://corporate.goodyear.com/content/dam/goodyear-corp/documents/events-presentations/qtr3_2023_goodyear_investor_letter.pdf" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">Q3 earnings report</a>, Goodyear generated 3.2% less sales from a year-ago quarter, delivering a net loss of $89 million at $0.31 EPS loss. The cited reasoning for these losses was operations reorganization in Europe, Australia, and New Zealand to streamline long-term cost structure.</p>
<p>This aligns with Elliott’s claim in May that “Goodyear’s margins are the lowest in the tire industry, trailing its closest peers, Michelin and Bridgestone, by ~700 basis points.” Now that the activist push is finalized, investors expect a new turn for the company.</p>
<p>Based on eight analyst inputs pulled by Nasdaq, GT stock is a “buy.” The average GT price target is $17.95 vs. the current price of $14. The high estimate is $21, while the low forecast is $16 per share, above the current price at press time.</p>
<p><strong><em>Do you think activist investing is a net positive for</em> <em>finance? Let us know in the comments below.</em></strong></p>
<p>The post <a rel="noopener noreferrer nofollow" href="https://tokenist.com/three-stocks-targeted-by-activist-investor-elliot-management/">Three Stocks Targeted by Activist Investor Elliot Management</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://tokenist.com">Tokenist</a>.</p>

Three Stocks Targeted by Activist Investor Elliot Management

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