$UNP Up 10% After Announcing New CEO Search
While I'm not a devout efficient markets supporter, Union Pacific's 10% increase today after its former CEO Lance Fritz announced he was stepping down feels quite telling.

Spurred by a presentation sent to the board from activist investor Soroban Capital Partners yesterday, it is clear the market is optimistic about a fresh vision as this big of a move is wild for a $100B+ industrial.

Here is the link to Soroban's presentation:

I'm not generally excited by the world of activist investing.

However, I will pay close attention to this over the next few months since UNP was a new position I was beginning to build for my daughter, and many of the points made were convincing.

Much of this presentation seems to boil down to UNP's management effectively mismanaging a tremendously wide moat that the company operates behind.

In simpler terms, its long-term opportunity remains perfectly intact, but its short-term issues must be fixed immediately.

Perhaps the most jarring portion of the presentation was the company's Glassdoor ratings (say what you will of these). Of the stocks in the S&P 500, UNP came in dead last in each of the following employee ratings:

  • Overall Rating
  • Recommend to a Friend
  • CEO Approval Rating
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Generally speaking, I think these ratings can be overhyped, but in UNP's case, it is pretty clear something needs to be rejuvenated.

Historically, Union Pacific has kept its ROIC well into the double digits -- currently sitting around 15%.

Furthermore, its 2.7% dividend has been increased for 16 consecutive years and only uses about 45% of its earnings.

Even after its jump, UNP trades at 19x earnings or 23x FCF, whichever you prefer, and still looks pretty attractive -- especially if its short-term performance can be improved with a new leader.

Curious to know what you all think of activist investing in general and what you think in Union Pacific's case here.
Will Union Pacific beat the market over the next decade?
25%Roughly equal
12 VotesPoll ended on: 3/2/2023
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