A new study found that hedge fund activists like Bill Ackman and Carl Icahn are better at stock picking than at adding long-term value to companies. This according to a recent article in Institutional Investor.

The study report states, “activist hedge funds profit from superior stock selection and trading skills, not from turnaround planning that benefits the overall firm.” Since hedge funds target underperforming firms, the authors note, “such an effect, rather than activity by the hedge fund itself, could explain the increase in firm value” after activist intervention.

The study compared activist targets to a group of “control” firms, companies with similar characteristics but that had no activist intervention. It found that while both groups outperformed the broader market after the commencement of activist campaigns, over the longer term the target companies significantly underperformed the control firms.

The research team also looked at whether activist funds demonstrated trading and marketing timing skills and found that activists tend to sell target stocks when the companies reported good news, outperforming buy-and-hold shareholders in the same stock.

The report concluded that the findings suggest “a reinterpretation of the role of activist hedge funds” by showing that these funds “exhibit both strong selection skills and strong trading skills…The fact that these skills do not seem to benefit other (particularly buy-and-hold) shareholders of targeted firms challenges the view that hedge fund activism adds long-term value to firms.”