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Activist investor Jeff Smith calls tax reform 'huge wind at the back'

  • Starboard CEO Jeffrey Smith sees tax reform, and specifically repatriation, as strong boons for his business.
  • Smith also discussed the firm's stake in companies like Marvell, Macy's and Yahoo.

Ideas floating around Washington for tax changes could serve as a major boon for activist investors like Starboard Value CEO Jeffrey Smith.

In an interview Thursday morning, Smith said tax reform generally and giving companies breaks for profits earned overseas specifically are potentially important ingredients for the activist firm's success.

"Tax reform can be a huge wind at the back, and there are other ways for us to be able to succeed," Smith told CNBC on the sidelines of the 13D Monitor Active-Passive Investor Summit.

Additionally, he said a proposal for "repatriation," or allowing companies to bring back overseas profits at sharply reduced rates, also has benefits.

Plans for major changes in taxation, from the number of tiers that will be applied to individual earners to the top tax rates for companies, were unveiled by White House officials Wednesday. President Donald Trump has vowed to make tax reform a major priority of his administration.

Without getting into deals of the Trump plan, Smith said changes like repatriation can help.

"It's going to give additional flexibility. It's another tool," he said. "Companies that have extra cash have a job as board members and capital allocators to decide what to do with that cash. ... If there's more cash that they have available to them, that's more flexibility. Then, yes, there are more tools in the toolbox."

The remarks came during a broader discussion of the approach Starboard has taken with various companies. The company has a well-performing stake in Marvell Technologies and is involved in the implementation of Verizon's Yahoo takeover.

Starboard also has taken a poorly performing stake in Macy's.

"At the end of the day, you have to buy into good companies that have good core businesses so you can refocus on those core businesses and improve their operations," he said. "Sometimes you get them right, most of the times you get them right, every once in a while you might not get it as right."