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Expert view of activist benefits to short term stock prices

Source: CNBC, April 23, 2014 video and article

Shareholder activism your friend: Cramer

Wed 23 Apr 14 | 06:15 PM ET

Mad Money host Jim Cramer says shareholder activism works for every shareholder, and offers his take on the Valeant/Bill Ackman bid to acquire Allergan. The market is better off for these efforts, he says.

[see transcript below]

Big money activism: Helpful or harmful?

Lee Brodie | @LeeBrod

In the wake of a recent hostile takeover attempt, Jim Cramer takes a hard look at investor activism.

Does it really benefit individual shareholders?

Digital Vision | Getty Images

Cramer says that even though he bemoaned the specific events involving Allergan and billionaire investor Bill Ackman, he firmly believes in most cases the answer is yes, activism works for shareholders.

When you're looking for stocks that could have significant upside, "sometimes you have to break eggs. Activists are fabulous egg breakers," Cramer said.

"Think about how much activist Nelson Peltz has made you over the years with his jabbing at Wendy's, Heinz, Dupont, and Ingersoll Rand," Cramer said.

"You must respect Carl Icahn's goading of countless companies to bring out value including, of late, Forest Labs, Chesapeake and Ebay all of which better served shareholders because of his pressure. Or the good work Dan Loeb did getting Yahoo! to clean house. Or how Elliott Management pushed Hess to streamline.

Although Cramer views the Allergan takeover through a slightly different lens, he concedes that even in this case, "I can't castigate anything that moves stocks up legally."

All told, Cramer believes activism benefits shareholders.

"The simple truth is that while some CEOs actively work for you to unlock value, others don't. They are the ones that need the fire lit. Activists simply provide the match."

Shareholder activism your friend: Cramer

Wed 23 Apr 14 | 06:15 PM ET

The following transcript has not been checked for accuracy.

love it or shareholder activism works for you. it could happen to the pharmaceutical gem that we have been recommending forever if copy. to be fair the model has been working fabulously. i expect that the fantastic research and development budget that sets allergan apart will be gone in they get it. i don't think it's fair that he was able to buy 10% when he news a take over was coming. it is absolutely legal. but i didn't like that the former head of enforcement blessed the transaction himself. although thanks to the transaction of the resolving door he's a corporate lawyer now. couldn't he have lead someone else to do the dirty work? is this the same government man protecting retail experts a few months ago? sadly yes. kind of a let down. but all of that said, more than anything else what i want is for you to make money. sometimes in order to make an omelet you have to break some eggs. as it happens, activists are fabulous egg breakers. he's practically a top chef with his work here. all big wins. think about how much the activist made over the results. i bet he was. it helped him clean house. they're trying to remove the ceo and stop his plan to break up the company which i believe would destroy and not create shareholder value if he gets his way. i guess they want to bring out more value but i don't know how much value is left to bring out t. market is better off for these efforts and we have to salute the new trend. it's working for you and not against you and that's all we really want if we buy stocks, right? including activists that put companies in play and force them to unlock value. the simple truth is while many ceos want to bring out value, plenty of others just want to be ceos. the activists are simply providing the match. up next, a tech speck that's already doubled twice in a little over a year. think you know what it is? you might be surprised.

URL:http://video.cnbc.com/gallery/?video=3000269565

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