Lessons On Activist Investing From Starboard Value's Jeffrey Smith

There is a general perception on the Street that companies and managements fear activists investors or have a strong dislike for them. However, according to Jeffrey Smith, founder CEO and CIO of Starboard Value LP, that’s not always the case.

Smith was recently interviewed by Wall Street Week’s Anthony Scaramucci. In the interview Smith revealed how he became an activist investor and why critics of activist investing are wrong.

The Journey

Smith revealed in the interview that after graduating he worked in investment banking for less than two years and post that went on to help his father in running his fresh orange juice company.

On his transition from working at his father’s company to becoming an activist investor, Smith said, “I had no idea when going to work with my father that it was going to be so relatable to what I do today. I had no idea I was going to be an investor, let alone an activist investor.”

 Smith continued, “But it’s not just that, it’s not just analyzing businesses and determining whether they have over capacity or under capacity or their capitalization on the balance sheet. I would say it’s even more about the human nature element."

Nothing To Fear About

Smith was asked to explain why people who criticize activist investing are wrong. He replied, “We have the benefit of being able to look at it and say ‘what do we think would be best for this company?’.”

“Let’s not, I mean going back to my days working inside of a company and understanding what happens inside of a company that’s not always easy to do when you are living it day to day and you are inside the business because it becomes personal, it becomes about so much more than making the right decisions everyday for the company.”

According to Smith most CEOs and companies that Starboard has worked with don’t fear his firm or activist investors, which include Darden Restaurants. Those that do fear, he feels, are the ones with which have a strong disagreement with activists such that it leads to a proxy fight.