Activist Thursday…

Another day, another two conferences. Today, I’ll be skipping between the Institutional Investor Forum at the Waldorf and the World Business Forum at Radio City to hear two different takes on activist investing. (If you’re at either, ping me and say hello). This morning, former SEC Chair Richard Breeden spoke at the Waldorf about activist investing and the role he played at both Applebee’s (APPB), which we footnoted in January as well as H&R Block (HRB). Later today, Carl Icahn will be speaking at Radio City.

Breeden’s take is that activism is not only here to stay, but that he expects it to grow significantly because there are “tons and tons of poorly managed and badly governed companies in the U.S. and that mediocrity is more widespread than you would like to think it is.” Ouch! His fund, Breeden Partners, currently runs about $1.5 billion and has a concentrated portfolio of 8 to 12 stocks that he describes as under performing and undervalued.

“Over time, activism will grow in importance as more investor institutions recognize it as a legitimate asset,” Breeden said. “It’s still small compared to hedge funds and private equity, but there’s a number of major long-term investors that have significantly increased their allocations to the sector.”

Breeden’s trigger points should also be familiar to footnoted readers: transparency, especially when it comes to SG&A, a sleepy board and drunken spending on things that don’t appear to benefit the underlying business. “We always like to see better financial disclosure and more coherent financial disclosure. If there’s bad transparency and a sleepy board those are things that lead to…people like us evaluating the situation.”

I’ll be back later today with Icahn’s thoughts on activism.