Activist investors are a lot like the stars of HGTV shows -- they just love to find fixer-uppers with potential. And the ones who run hedge fund Starboard Value think they have found just such a property in healthcare technology giant Cerner (NASDAQ:CERN). They may have a point -- shares have overall spent the past five years moving sideways.

In this segment from MarketFoolery, host Chris Hill and Motley Fool Asset Management's Bill Barker parse the market's upbeat reaction to the news that Cerner will let Starboard name four members to its board, and also will be authorizing a $1.2 billion stock buyback. They also address the unusual fact that this company is willing to take so much strategic direction from an investment firm that holds such a small fraction of its stock.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on April 9, 2019.

Chris Hill: Let's move on to Cerner Corp., which is a healthcare technology firm. Cerner has reached an agreement with Starboard Value, well-known activist investors, to add four members to the board of directors. Cerner is also buying back $1.2 billion worth of stock. Which of these two things is pushing shares of Cerner up 10% today? Based on the fact that shares of Cerner have treaded water over the last five years or so, I'm assuming it's the board seats.

Bill Barker: I think, yeah. Swimming along in the line that Starboard is recommending, it's remarkable, Starboard really doesn't have that much of Cerner. I read about 1% of Cerner's stock. But there's a whole laundry list of changes that are going to be made, including the strategic business unit being eliminated. I think the dividend was just recently started by Cerner, and it looks like they are going to be forced to change some of their capital allocation, including at least an authorization to buy back up to $1.2 billion. Whether that gets follow-through or not, we'll see. But, I think the board seats. It's all part of the equation. I don't know how you can separate a 12% move when it opened, and now it's maybe 8% or 9%, what part of that is ascribed to what part of this whole package.

Hill: I'm not looking to knock Starboard Value. But I am curious about something that you just said, which is that Starboard Value only has a 1% of Cerner's stock? How are they getting four seats on the board if they only have 1% of the stock? This seems like something you'd get when you have at least 5% of the stock, and really closer to 10% of the stock.

Barker: I agree. I was surprised when I read that. I want to admit that I need to make sure that that's the case before going too far. But if it is the case, you can guess that they have some other shares that they are in communication with that are on their side. Because, yeah, 1%, if that's all that it means? Sell your 1% [laughs] if you're that unhappy. You don't have as much power as you think. But if they have plenty of people on their Rolodex and know where to push the buttons and organize the votes at proxy time, then that's a different story.

Hill: Yeah, I was going to say -- if, in fact, it's only 1%, that opens up a whole world of opportunity for activist investors, potentially.

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