If you've looked at Volvo's
A large hedge fund has bought millions of the company's A shares (the kind that comes with more voting power) over the past week, pushing the share price up by more than 5%. The Swedish financial media is abuzz with speculation about the intentions of the raised stakes, and many observers think that the fund is hoping to force a massive dividend payout. A recent research report from JPMorgan Chase
Johansson says that the management team is looking for opportunities to use much of that money to expand into markets like China and Russia in a big way through direct acquisitions. He thinks that organic growth will be hard to come by for the next few years, and he's ready to grow the expensive way instead.
The company will consider "anything within its business areas," so anything from trucks and boat engines to heavy construction equipment and airplane engines seems to be fair game. With cash alone, Volvo could afford to look west and buy either Navistar
So an activist investor wants a juicy one-time payout, while management wants to grow the business instead. I can't say that I'd be disappointed with either outcome, but if you're holding this stock for the long term, then long-term reinvestment in the business is the more attractive option. Accordingly, this Fool is cheering Mr. Johansson every step of the way.
- Volvo earned a bronze medal in the Foolish Olympics.
- See how you can benefit from a cyclical industry.
- Save yourself from massive losses.
Fool contributor Anders Bylund is a Volvo shareholder, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like. Foolish disclosure keeps you truckin'.