Why I'm glad to see two new developments from activist investors at Air Products and Chemicals and Southwest Airlines; Good news for Berkshire Hathaway's BNSF Railway; My latest money-saving tip

1) Turning from stocks I'm warning readers to stay away from – like Boeing (BA), from yesterday's e-mail – to ones that I think look promising...

Following up my e-mail on Monday about activist-investor involvement at industrial gas company Air Products and Chemicals (APD), this Reuters article from yesterday highlights an important development: Former Linde executives team up with Mantle Ridge in push for changes at Air Products. Excerpt:

Two former top executives at Linde Plc will join activist investor Paul Hilal in his bid to shake up management and the board at rival industrial gas company Air Products and Chemicals, people familiar with the matter told Reuters.

Dennis Reilley and Eduardo Menezes are teaming up with Hilal's investment firm Mantle Ridge LP which has built a stake of more than $1 billion in Air Products, said the people who are prohibited from discussing the firm's strategy publicly...

Hilal is also working with other former Praxair and Linde executives to push for changes at Air Products, the sources said. These include succession planning for octogenarian chief executive Seifi Ghasemi, restructuring the board, improving capital allocation and overhauling the company's strategy, people familiar with Hilal's strategy said...

Hilal is eyeing Reilley to become Air Products' executive chairman while Menezes might become chief executive officer, the sources said.

This led leading industry analyst Graham Copley from research firm C-MACC to write:

With Dennis Reilley and Eduardo Menezes at the helm, Air Products could look like an industrial gas company again. We view this development as the best way forward for a company that has lost its direction...

Some activist investors push for near-term change at companies to the detriment of long-term shareholders, but efforts at Air Products look different...

Mantle Ridge efforts to install a proven management team at Air Products and shift its strategy is likely for the best...

It is somewhat ironic that some of the same people who put Mr. Ghasemi in his current role are now asking for change, but the company clearly needs a reset, and the Mantle Ridge plan is the best starting point we have seen.

I agree with Copley. This news reinforces my analysis of the situation and the likelihood that D.E. Shaw and Mantle Ridge will succeed in their activism... and that APD's share price will respond well.

2) I've also written three times recently (August 28, September 3, and September 12) about another activist campaign in which Elliott Investment Management is looking to replace the CEO and most of the board of Southwest Airlines (LUV).

After the changes Southwest announced at its September 26 investor day failed to satisfy Elliott, the firm on Monday initiated a proxy contest (its first since 2017), calling for a Special Meeting of Shareholders on December 10 at which shareholders will be able to vote for the eight candidates Elliott has put forward to replace two-thirds of Southwest's board. (You can read Elliott's press release right here.)

As background, the Wall Street Journal recently profiled Southwest's embattled CEO, Bob Jordan: The Ultimate Southwest Insider Tasked With Reinventing the Airline. In it, he comes across as very likable – and he's promising change. Excerpt:

For more than 30 years, Bob Jordan has been cast as Mr. Fix-It in different roles at Southwest Airlines. Revamping the airline's business model is his biggest challenge yet.

Southwest's battle with activist investor Elliott Investment Management has become a referendum on Jordan, the company's chief executive since February 2022, and whether the ultimate insider can make changes that some investors and passengers say are long overdue.

At an investor event last month, the 64-year-old confidently laid out Southwest's plan to assign seats at booking and sell premium seats with extra legroom for the first time. The airline is also hitting the brakes on growth in the coming years, slashing unprofitable routes and making plans to sell planes.

"It's a transformational plan. It'll change the airline," Jordan said in an interview. "Now it all turns to executing."

But Elliott isn't convinced. As the WSJ continued:

"Why is Mr. Jordan – who has delivered years of unacceptable financial results and, until very recently, was dismissive of the actions announced today – the right leader to execute on these 'transformative' changes?" Elliott said after Jordan's presentation to investors. "The answer is clear: He is not."

This all looks like a win (a little)-win (a lot) dynamic here for Southwest shareholders...

Even if Elliott's campaign fails, the changes Southwest has already announced are steps in the right direction and are likely to boost the share price (unless there's an external shock like a recession or big spike in oil prices).

And if Elliott succeeds, the changes will be even more rapid and dramatic... which will result in an even greater gain for Southwest's stock.

3) Following up on another stock I've written about recently...

One of the key pillars of the bear case for Berkshire Hathaway (BRK-B) that I outlined in my e-mails on September 27 and September 30 is that, according to an anonymous member of Value Investors Club who posts under the name arm505: "Burlington Northern ["BNSF"] is perhaps the worst managed railroad in North America."

I ran the numbers – and as I said on September 27:

As you can see in the chart below of revenues and operating income, arm504 is indeed correct that BNSF has significantly underperformed UNP [Union Pacific]. Take a look at the changes since 2019:

This is why, in my October 1 e-mail explaining why "I still believe long-term-oriented investors should be comfortable continuing to hold" Berkshire's stock, I wrote:

Every other major railroad in North America has dramatically boosted its earnings by adopting "precision railroading," so I eagerly await BNSF's adoption of it.

Thus, I was delighted to see this recent article in the WSJ: Can a 'Precision Scheduling' Expert Fix Berkshire Hathaway's Railroad?

This chart from the article shows that BNSF has the highest operating costs of any major railroad in North America:

To address this, Berkshire has brought in as a consultant one of the leading experts on precision railroading. As the WSJ writes:

The railroad hired industry veteran Ed Harris, a proponent of precision scheduling, an operating model that is prized by investors and that executives at BNSF have resisted. Harris has told people that [Greg] Abel recruited him as a consultant for BNSF, according to people familiar with the matter.

A BNSF spokesman said Chief Executive Kathryn Farmer has known Harris for years and the company has a history of seeking outside perspectives to ensure it is delivering the best service possible. The spokesman disputed that Abel initiated the hiring of Harris. Abel didn't respond to a request for comment; Harris declined to comment.

Harris, 74, is a disciple of the late Hunter Harrison, the father of precision scheduled railroading, or PSR. Harris has helped implement the system at multiple freight railroads in North America. The strategy aims to cut costs in part by running trains on tighter schedules, removing excess equipment, and trying to get more cargo on a return trip rather than having a train return empty.

I think this news bodes well for BNSF's future earnings – and Berkshire's share price.

4) I've said several times this year that the single best way to pocket a lot of free money right now is to transfer excess cash from a checking or savings account at a bank or brokerage – on which you are likely earning zero or close to zero interest – into an account yielding the current short-term market interest rate of nearly 5% (I discussed this most recently on September 26).

But the second-best way is to call your cellphone carrier and ask if there's any way to save money.

I did so and reduced my bill by more than $100 per month! We're on a five-person family plan with Verizon Wireless and I was paying $323 per month. Just by asking, they moved me to another plan that only cost $264.

But wait, there's more...

When I went to the website and logged in to confirm the change, I noticed a little box that said "Save $50 per money by signing up for autopay." I was initially confused because I was already on autopay... But when I clicked the link, it turns out that I wasn't getting any discount because the autopay was through my credit card.

By switching it to my bank account, Verizon reduced my bill by $10 per month per person, or $50, thus bringing my monthly bill to $214.

In other words, with a simple phone call, I reduced our family's cellphone bill by a third – saving me $1,308 per year!

So give it a try – call your cellphone provider, ask what they can do for you, and let me know what happens... As always, send me an e-mail by clicking here.

Best regards,

Whitney