Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / How Bull Markets Are Reshaping Activist Investing in 2026
Transcript
- Lucas: So the S&P 500 is sitting near 7,575 as of this morning, and the NASDAQ is up another six tenths of a percent over the past five days. Growth stocks are flying. And yet, some of the most interesting action in markets right now isn't in the stocks themselves — it's in how the big money is trying to change those companies from the inside. Luna: You're talking about activist investors. The Carl Icahns of the world. But I get the sense the playbook is shifting. Lucas: Dramatically. And it's not just about Icahn or Bill Ackman anymore. There are something like 60 activist funds managing over $200 billion in assets today. And in a bull market where most stocks are already going up, the traditional activist approach — storm in, demand a breakup or a sale, fight a proxy war — it becomes less effective. Luna: Because if the stock is already rising, shareholders are less likely to agitate for radical change. Lucas: Exactly. So activists are adapting. There's a term for it now — 'constructivist' investing. Instead of a hostile fight, they take a smaller stake, work quietly with management, push for operational improvements, margin expansion, better capital allocation. The goal is a 15 to 20 percent return over 18 months, not a 40 percent pop from a fire sale. Luna: And that actually aligns better with institutional investors. Pension funds and endowments don't love the drama. Lucas: Right. BlackRock and Vanguard own 5 to 10 percent of most S&P 500 companies. They're not going to side with an activist in a messy proxy fight unless the plan is clearly value-creating. So the activists who win are the ones who bring detailed operational plans, not just a slide deck demanding a breakup. Luna: Can you give me a recent example? Lucas: Sure. Take the case of a mid-cap industrial company — let's call it a precision manufacturing firm with about $4 billion in market cap. Late last year, an activist built a 6 percent stake and pushed for margin improvement. But they didn't go public with a letter. They had private dinners with the CEO, shared their analysis of where the company was leaving money on the table in procurement and supply chain. Luna: And management actually listened? Lucas: They did. Because the activist's analysis was good, and the CEO knew that if they didn't engage, the next step might be a public campaign. So the company adopted several recommendations, margins improved by about 300 basis points over two quarters, and the stock went up 25 percent. The activist exited quietly, and everyone looked good. Luna: That's the constructivist model. No headlines, no drama, just returns. Lucas: And it's becoming the dominant model. According to data from Insightia, the number of proxy fights globally has actually declined by about 15 percent in the first half of 2026 compared to last year. But the number of private engagements — where activists take a stake and negotiate behind closed doors — is up nearly 30 percent. Luna: So the bull market is making activists more patient. That's counterintuitive — you'd think rising markets would make them more aggressive. Lucas: You'd think. But when the tide is lifting most boats, the cost of a failed proxy fight goes up. If you go public and lose, you've burned a bridge and the stock might dip. Better to work quietly and let the market tailwind do some of the work for you. Luna: And there's another factor — the rise of mega-activists like Elliott Management and Pershing Square. They have so much capital that they need bigger targets. They can't just buy 5 percent of a small company and flip it. Lucas: That's a great point. Elliott's last big campaign was at a major energy company with a $40 billion market cap. They pushed for a spin-off of the renewable division. That's not a quick trade — that's a multi-year engagement. And it happened entirely through private discussions until the very end. Luna: So what does this mean for the average investor? If you own an ETF that holds a company being targeted by an activist, should you care? Lucas: I think you should care — especially if it's a constructivist campaign. Historically, companies targeted by activists outperform the market by about 4 to 6 percent over the following 12 months, even after the initial pop. That's not massive, but it's real. And in a bull market where alpha is hard to find, every bit helps. Luna: Are there any sectors where activists are particularly active right now? Lucas: Yes. Technology and healthcare are the two biggest. Tech because there are so many companies with high margins but inefficient cost structures — think overstaffing, redundant R&D. Healthcare because of the fragmentation — you have hundreds of small and mid-cap biotechs that could be merged or sold. Luna: And the regulatory environment matters too. The SEC under this administration has been less aggressive on shareholder proposals, which gives activists more room to operate. Lucas: True. And that's a change from a few years ago when there was talk of tightening rules on activist disclosures. For now, the window is open. Luna: You know, this reminds me of something I've been thinking about. If our money conversations have helped you think about a decision differently — maybe you looked at your portfolio differently, or understood a stock move better — a couple of dollars a month is genuinely what keeps these going. Buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: Yeah, it really does make a difference. We keep the show ad-free, and that's only possible because of listener support. So if you've found value here, that's the place. Luna: Alright, back to activism. One other trend I've noticed — the rise of 'ESG activists.' Funds that push for environmental or social changes as a way to unlock value. Lucas: That's a real thing. Engine No. 1, the tiny fund that got three seats on Exxon's board in 2021, was just the beginning. Now you have dedicated ESG activist funds, and even traditional activists are layering in ESG language because they've learned it resonates with institutional investors. Luna: But isn't there a risk of greenwashing? An activist pushing for 'sustainability' but really just wanting a higher stock price? Lucas: Absolutely. And critics argue that some ESG activist campaigns are superficial — they ask for more board diversity or climate disclosures without addressing core business issues. But the more sophisticated ones tie ESG to operational efficiency. For example, reducing energy use directly lowers costs. That's not greenwashing, that's just good management. Luna: So the bar is rising. You can't just show up with a slide deck and a demand anymore. Lucas: Exactly. The best activists today are former operators — ex-CEOs, ex-consultants — who know how to run a company better than the current management. They don't just identify problems, they come with solutions. And in a bull market, that's the only kind of activist that gets a hearing. Luna: What do you think the next big shift will be? Lucas: I think we'll see more activists using derivatives to build stakes without triggering disclosure rules. It's already happening in Europe. And I think we'll see more 'wolf pack' activism — multiple small funds coordinating informally to pressure a company. It's harder to track, but it's effective. Luna: So the game keeps evolving. And investors who understand the dynamics can potentially get ahead of the moves. Lucas: That's the takeaway. Pay attention to which companies are being targeted, and whether the activist has a credible plan. If they do, the stock might have more room to run — even in a bull market.