According (subscription required) to the Wall Street Journal, "Activist funds lost almost 10% in the first two months of this year, after falling almost 31% last year, according to Hedge Fund Research. That's worse than other hedge funds and in line with the overall market, suggesting that many are simply long-only investors who take concentrated positions in single stocks."

In the current market, that's what many have turned into. They simply lack the knowledge or willingness necessary to create value outside of prodding companies into sales.

But one exception so far appears to be Steak n' Shake (NASDAQ: SNS). On August 7 of last year, activist investor Sardar Biglari installed himself as the CEO -- having already attained the chairman's title after a lengthy proxy fight. Since then he's cleaned house and the stock soared on Friday when the company reported a surprise profit. The stock has gone from $7.08 per share when he became CEO to $11.05 -- in one of the toughest markets for restaurant stocks in a long, long time. Whether the cost-cutting strategy will lead to long-term success remains to be seen but so far Biglari is silencing his early skeptics -- I was one of them.

Biglari is an interesting example of the shift in activist investing. Before he got involved with Steak n' Shake, he was best known for his proxy fight with Friendly's -- a battle that ended with the sale of the company to a private equity firm at a price that most likely has made the deal underwater by quite a bit now that the market has shifted.

For activist investors to succeed in the current mergers and acquisitions marketplace, they'll need to develop a more long-term minded approach to increasing value. If they do that, they'll be an important part of rebuilding corporate America into the great wealth machine that it once was.