3 Best Activist Campaigns of 2013

Photo by: Benno Hanson.

I have a special place in my heart for the activist investor. The media often give them a bad rap, but activists play an important role in making big, quick changes in America's biggest companies.

So, with that said, I wanted to look back at the three best activist campaigns this year to highlight how activist investors can work for the good of all shareholders.

1. A fruity concoction
At the top of this year's list is Carl Icahn's stab at Apple (NASDAQ: AAPL  ) . By now, every investor knows that Apple has a boatload of cash -- some $40.5 billion in cash plus more than $106 billion of other investments.

Growing corporate cash hoards are a real problem for investors across the board. Too much cash threatens long-run stock returns, since cash and debt investments simply do not provide the same return as equities -- ownership of a business.

Most laudable is Icahn's demand for speed. Apple has a buyback and dividend plan in place, but Icahn wanted it done immediately. He suggested Apple borrow against its cash and investments held overseas to make big buybacks spanning a single year.

By and large, the debate is mostly over. Apple will return as much as $100 billion to shareholders by 2015, with the bulk coming in the form of share repurchases. David Einhorn deserves a mention, too, for his suit against Apple, and subsequent plan for Apple preferred stock, which kicked off a universal discussion about the iPhone maker's massive cash stash.

2. An automated return of capital
Remember Redbox? While Outerwall (NASDAQ: OUTR  ) , formerly Coinstar, isn't necessarily a stock that gets widespread attention, it makes frequent appearances in value investing and activist circles.

Outerwall underwent a name change to enact a new strategy: Make every product under the sun available in automated kiosks, from coffee to sandwiches. Unfortunately, few of its new initiatives could stand up to its Redbox and Coinstar machines in profitability.

That's when Jana Partners entered the fray. The activist group acquired a 13.5% stake, pushing Outerwall to return cash to shareholders instead of investing in new, mostly unproven, vending businesses. The company has since approved a $100 million buyback, tossed its new ventures out the window, and had its president "step down." Not to mention, shares have surged since Jana announced its position.

What's most important here is that an outside activist group was capable of ending a new ventures program that existed mostly as a jobs program for management.

Redbox won't last forever -- DVDs, BluRay disks, and physical media are dying a slow death. Outerwall had two choices: enjoy the money while it lasts, or throw cash at new attempts to recreate Redbox's success. Jana said "no go" to new concepts; shareholders should take the money and run.

3. A political mess
Bruce Berkowitz was successful in bringing AIG back to private hands, but a new effort to privatize Fannie Mae (NASDAQOTCBB: FNMA  ) and Freddie Mac  (NASDAQOTCBB: FMCC  )  may be his biggest campaign ever.

The plan had to be on this list for the sheer complexity and difficulty of actually getting this deal done. Berkowitz will have to convince the government to give up a cash cow -- two companies that have given the government more than $100 billion in 2013 alone.

I still think this deal is a long shot, and so does the rest of the market. Fannie Mae and Freddie Mac preferred stock is essentially priced as if this is a 5-to-1 event. These are long odds, indeed.

And it won't be easy for political reasons. Lawmakers have little desire to give up deficit-busting, profitable mortgage companies. The president has spoken negatively about giving Fannie Mae and Freddie Mac to shareholders. And Congress routinely bickers back and forth about who exactly should insure America's trillion-dollar mortgage industry.

If Berkowitz strikes gold in Fannie Mae and Freddie Mac, a future Foolish article from the year 2100 should name him activist of the century.

Our analyst's top stock for 2014
The market stormed out to huge gains across 2013, leaving investors on the sidelines burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!

Gold Prices Are Still Down: Here’s Why

Gold prices are the honey badger of precious metals right now.

As 2011's very popular YouTube video showed us, the honey badger makes moves that don't make sense - it "don't care."

And neither does gold.

Like the honey badger, gold prices just don't seem to care that the world has teetered on the brink of destruction all year. They just keep heading lower.

Gold prices have been trending down for most of this year. On Jan. 2, the London spot price was $1,693.75 per ounce. As of this writing, the last bid was $1,286.88, a loss of 24%.

In the meantime, the civil war in Syria escalated, at times threatening to engulf the Middle East in flames. The U.S. government shut down for two weeks, threatening countless visits to National Parks. The world seems to have moved from crisis to crisis without pausing for breath.

And there's been inflation. The American Institute for Economic Research's (AIER) Everyday Prices Index (EPI), a measure of inflation tied to prices of consumer staples, shows a 2.5% increase since January, more than double the Consumer Price Index's 1.1%.

Furthermore, the U.S. Federal Reserve's lead foot on quantitative easing keeps the possibility of a global currency crisis on the table.

Crisis and inflation historically drive gold prices up. That's one of the reasons we here at Money Morning still think gold is an essential piece of any portfolio. We've had both over the last year, but the price of gold has continued to move lower, month after month, apart from a brief run this summer.

The reasons for gold's continued fall, in spite of the apparent decay of the world, just might surprise you...

Gold Is Heavy, but Macroeconomics Is Heavier

As it happens, there have been quite a few factors that have been weighing gold down, according to Money Morning Global Resources Specialist Peter Krauth.

"Gold is still in the bottoming process that started in April," said Krauth.

The price, said Krauth, "reflects a few things. First, there's the European Central Bank (ECB) rate cut, which strengthened the dollar on a relative basis. A strong dollar means less demand for gold. The second thing is the 2.8% economic growth reported for Q3, which is up from the original estimate of 2.5%."

Combine that with a stronger-than-expected jobs report and "Investors start thinking - perhaps erroneously - that the Fed will start seriously considering tapering sooner than March 2014."

Statements from the Federal Open Markets Committee (FOMC) have indicated that tapering - the process of ending quantitative easing - would only start if the economy showed signs of strengthening. Better-than-expected gross domestic product and payroll growth do, typically, indicate economic strength.

Tapering would involve increasing interest rates. Traditionally, rising interest rates leads investors to pull out of gold in search of better yield. This, naturally, sends gold prices lower.

One traditional price support for gold is also missing, says Krauth.

Around this time of year, there is usually a spike in gold prices as India prepares for the Hindu festival of Diwali. According to The Wall Street Journal, Indians have purchased half as much gold as they bought a year ago. This was largely due to government efforts to contain India's current-account deficit by imposing a 10% tariff on gold imports.

"I believe the import restrictions and taxes, causing restricted supply and higher prices, have undeniably dented Indian gold demand, providing no support for gold prices," Krauth says.

There's more to the Indian gold situation, however, than meets the eye. On Monday, Peter will reveal an incisive report explaining why one of the world's largest countries is sitting pretty, even without imports of its favorite metal.

In the meantime, just because prices for gold are low now, doesn't mean they'll stay low forever. The fundamental reasons for owning gold are still in play, and here's why they'll start to play out next year.

Related Articles:

The Wall Street Journal:
India's Gold Demand Fell By Half Ahead of Diwali This Year AIER:
Lower Fuel Prices Pull Everyday Prices Down