Shareholder activism is all the rage these days, particularly the brand of hands-on investing in which tough-talking fund managers like Carl Icahn of Icahn Partners and Daniel Loeb of Third Point chide chief executives as incompetents and bully them into changing strategy to boost short-term performance.
Then there’s Matthew Feshbach.
When teen-clothing retailer Delia’s warned investors about weak quarterly earnings in April, Feshbach, whose money management firm MLF Investments owns 18 percent of the company, immediately huddled with its senior management — to help them craft a press release asking for patience. Unlike many of his better-known, hotter-tempered brethren, he seeks to profit by finding capable managers that have encountered rough patches and helping to nurse their companies back to health. He has been an investor in Delia’s since it was spun off from marketing services concern Alloy in December 2005 and is advising the company as it morphs from an online and catalogue retailer to a bricks-and-mortar business.
“If you’re an activist, the world wants you to be adversarial and hostile,” Feshbach says. “But I am not sure that is how you get the best returns.”
“Matt understands this is a work in progress,” says Robert Bernard, CEO of Delia’s. “I can’t recall ever feeling he was imposing anything on us.”
Feshbach hasn’t always been so mild of temperament. He first made a name for himself on Wall Street in the 1980s as a co-founder of the swaggering short-selling firm Feshbach Brothers. In those days Feshbach and siblings Kurt and Joseph showed no mercy toward underperforming companies, frequently posing for photographs wearing jackets bearing the logo “Stockbusters.” The brothers posted an average return in excess of 35 percent a year from 1982 through 1990, before coughing up a 55 percent loss in 1991 and closing up shop. Matt spent several years dabbling in stocks, real estate, venture capital and private equity before launching MLF six years ago in Belleair Bluffs, Florida, near his home.
“After being a short-seller, I realized it was easier to make money with people you like than people you hate,” Feshbach explains. “I like to invest with people I trust and feel are competent.”
Today he manages about $200 million, mostly from wealthy individuals. Following a strategy he calls “ownership investing,” Feshbach aims to take 5 percent to 20 percent stakes in a handful of underperforming small-cap companies and work with management to turn them around.
One of his biggest successes has been Midas. He accumulated a 5 percent stake from December 2002 to February 2003 and helped the company exit its money-losing wholesale auto parts distributorship business so it could concentrate on its core auto-repair chain. By October 2003 the stock had more than doubled, to nearly $14 per share, and he continued to build his ownership to more than 10 percent, before exiting last year with the stock trading near $22. Over the five-plus years it has been in business, MLF has generated an average annual return of 34.5 percent, according to sources familiar with his performance. The firm currently owns just three stocks, aside from Delia’s: furniture maker La-Z-Boy, cruise ship operator Ambassadors International and moving-services provider Sirva.
But don’t mistake Feshbach’s friendliness for passivity. Consider his hands-on role at Delia’s, where he serves as nonexecutive chairman, frequently drops in unannounced on the company’s retail stores and checks in with CEO Bernard regularly to discuss strategy and tactics. To hear the CEO tell it, the biggest keys to Feshbach’s success are his patient, long-term approach and his willingness to take an active role without insisting that he has all the answers.
“He got into retailing not knowing very much,” says Bernard. “But Matt listens very well. He’s a great student who asks a lot of great questions. He understands that there is not one factor that affects our business to the exclusion of everything else.”
