What happened Shares of ON Semiconductor (NASDAQ: ON) popped today, up by 10% as of 1:05 p.m. EDT, after activist investor Starboard Value took a stake in the company and laid out a bullish thesis at the 13D Monitor Active-Passive Investing Summit, an investing conference for activist hedge funds. So what Starboard Value Chief Investment Officer Jeff Smith acknowledged that ON has faced challenges in recent years, but said it still serves attractive end markets and is positioned to grow going forward. The semiconductor company should be able to take advantage of growth opportunities in the automotive, industrial, and cloud power markets, which represent approximately 65% of revenue. Image source: ON Semiconductor. Compared to its own internal targets as well as peers, ON is currently underperforming on a number of fronts, including organic revenue growth, adjusted gross margin, and adjusted operating income margin. That has translated into underwhelming returns for investors, and a valuation discount compared to peers, according to Smith's presentation. Now what Smith said he sees a "meaningful opportunity to improve operations at ON," which could drive multiple expansion and create shareholder value if the company can execute more consistently. Starboard Value is advocating for ON to consider a fab-lite model, which could reduce cyclicality and increase free cash flow. Rationalizing the manufacturing footprint could also help profitability, since ON's capacity utilization rates are relatively low. There is also a possibility that ON could be an acquisition target as the industry continues to consolidate. ON announced last month that CEO Keith Jackson was retiring in May 2021, and Smith is optimistic that a leadership change could also be a positive catalyst, depending on who becomes the next CEO. 10 stocks we like better than ON SemiconductorWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and ON Semiconductor wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of September 24, 2020 Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.Source