The coronavirus pandemic has left many companies – and in some cases entire industries – in a precarious state, with serious concerns over their short- and long-term futures.

The Russell 3000 Index shed almost 25% of its value between February 18 and March 31, but not all companies were hit equally.

Due to the volatility, 428 companies saw their Activist Insight Vulnerability scores increase by five points or more during this period, indicating a significant increase in the likelihood of an activist campaign in the next nine months (five points is approximately 10% of the all-company median). Of these 428 companies, 73% saw an increase of between five and 10 points, and the remaining 27% increased by over 10 points. Of those 428 companies only 16% were deemed by Activist Insight Vulnerability to be highly vulnerable to activism in February. That number had increased to 58% by the end of March.

Activist investors will have to choose wisely, avoiding companies awash with debt and those with cash flow struggles. Valuations may reflect an expected drop in future earnings, but some companies’ managements might still be able to maximize value with spinoffs, asset sales, or strategic alternatives.

Below, we explore some of the biggest movers in each sector.

Consumer Cyclical

The consumer cyclical sector accounts for 13% of significantly more vulnerable companies. Brunswick, which Activist Insight Vulnerability highlighted as a potential target just over a year ago, has seen a 10-point increase in its vulnerability score. Sleep Number, a mattress manufacturer and retailer, saw an increase of over 17 points. While the drop in its share price is a contributing factor for Sleep Number, profitability is also a red flag.

PVH Corp., owner of fashion brands Tommy Hilfiger and Calvin Klein, had a five-point increase in its vulnerability score, and could be in the sights of an activist. The $3.4 billion market-cap company has taken drastic action to see it through the crisis.

Financial

Financial services, a broad sector, accounted for 23% of significantly more vulnerable companies and real estate investment trusts another 9%. Jonathan Litt, a real estate activist, has frequently taken to Twitter to highlight beaten down parts of the sector that are continuing to pull in rent. VEREIT, which saw its score increase by around 14 points, trades at about 70% of book value. Other companies that have seen sharp increases in vulnerability scores in this space include SITE Centers, Healthpeak Properties, and Sotherly Hotels – all worth activists keeping an eye on.

An activist might also take note of Trian Partners’ activist campaign at Legg Mason, where Nelson Peltz led the charge for governance changes and ended up with a big merger on his hands. Invesco, a $4 billion market-cap financial services firm, saw its vulnerability score increase by nearly 25 points and could be next.

Sterling Bancorp, a mid-cap savings bank whose vulnerability score increased by 20 points, could be vulnerable: it has a healthy balance sheet and its governance provisions are not inhibitors to activist campaigns.

Local regional banks, a frequent target for consolidators, might also look to cash out.

Basic Materials

4% of the 428 significantly more vulnerable companies were from the basic materials’ sector, including Celanese Corp, with Activist Insight Vulnerability’s in-house journalists suggesting it could be a breakup candidate back in August.

Element Solutions, a specialty chemical firm led by Martin Franklin, saw its vulnerability score increase by 12 points. Peer Ashland Global faced a proxy fight from activist Cruiser Capital for board changes.

Energy

We also highlighted World Fuel Services back in June 2018, and with a near 10-point increase in its vulnerability score, it could be one for activists to keep an eye on. Consolidation in the oil industry would not go amiss, and with the value of oil plummeting other small-cap firms may be bracing for activist campaigns.

Oklahoma-based exploration and production firm Devon Energy saw its vulnerability score increase by over 14 points. Having already reduced capex, it could be a takeover target when oil prices rise.

This sector accounted for just under 5% of significantly more vulnerable companies.

Healthcare

The healthcare sector comprised over 17% of significantly more vulnerable companies. Dentsply Sirona, a medical instruments and supplies company, has seen its vulnerability score go up by over 13 points. In September 2018, when its share price was around $38 (similar to now), Activist Insight Vulnerability noted its excess cash as a viable target for an activist, although balance sheet activism is likely to be frowned on during the pandemic.

Biotechs, accounting for 9% of significantly more vulnerable companies, are sure to pique the interest of activists on the prowl for high-risk/reward opportunities. One such firm, with a vulnerability score nine points higher than in February, is MyoKardia. The California-based company expects trials to resume as soon as it is safe to do so.

Industrials

Diversified industrials company Colfax, ranked as highly vulnerable by Activist Insight Vulnerability, currently has 2% of its ownership held by activists – and activists pushing to lead on a campaign could be ready to join. In November 2018, our journalists highlighted Colfax’s acquisitions and capital allocation policies, suggesting governance changes to boot.

Wex, a corporate and government payment processing provider, is waiting for its first activist to join its share register. The $5 billion market cap firm has a strong balance sheet and has generated year-on-year increases in operating income since 2016. A 13-point swing on its vulnerability score leaves the company increasingly vulnerable to being targeted.

The industrial sector represents 12.5% of companies who have seen an upturn in their vulnerability scores by five points or more.

Software

Software, accounting for 5% of significantly more vulnerable companies, includes stocks flagged in 2019 as vulnerable by our team: PTC and Autodesk. Having suffered share price problems even before the pandemic, PTC could face a review of its acquisition strategy and cost structure. Autodesk, a manufacturing and construction software provider, could likewise be more vulnerable in these uncertain times due its cost structure.

SS&C Technologies Holdings, a software giant based in Connecticut, is increasingly vulnerable according to Activist Insight Vulnerability. Nine activists hold a combined 2% of shares, waiting for a tenth to get the wheels in motion for a campaign.

NOTE: All vulnerability score changes are based on data comparisons of February 18 and March 31, 2020.