Since most hedge funds get paid based on their returns for the year, managers who do not want to underperform the market often turn to shareholder activism as a way to increase shareholder value and ultimately boost their returns.
Here at Stockpickr.com, we track many of the latest activist situations for those interested in piggybacking the best activist investors. This week's activist ideas are particularly focused on the small and mid-sized companies.
David Nierenberg’s D3 Family Investment Funds wants Brooks Automation (BRKS) to “commit to an immediate and continuing substantial share-repurchase program." Brooks Automation, which supplies a range of technology products to the semiconductor community, has $150 million in cash and zero debt. It trades with an EV/EBITDA of 17.
Nierenberg and his fund maintain that Brooks can generate sufficient cash over the next three or four years to fund the aggressive buyback and roughly double its revenues through internal growth and acquisition.
Prairie Capital reported that it owns 9.5% of the Midwest bank Taylor Capital (TAYC). Prairie said that the group is holding the stock for investment purposes and that it might discuss the company’s performance, business and strategic direction.
Any important metric in valuing a bank is their its value. Taylor Capital trades at 0.5 times below its book value of around $20 per share. That could be something to consider.
Next up is Bill Gates -- or at least Bill Gates’ Cascade Investments, which expects to consider alternatives for its stake in Strategic Hotels (BEE), a Chicago real estate investment trust. Cascade has converted its filing status to an activist position by filing a 13D. Strategic Hotels trades with a forward P/E of 3.9.
Mario Gabelli’s Gamco Investors reported owning 500,000 shares of Matrixx Initiatives (MTXX). Matrixx Initiatives, which trades with a forward P/E of 10.7 and EV/EBITDA of 8.8, operates in the drug delivery space.
Gabelli also boosted his holdings to about 4 million shares (9.5%) in Alpharma (ALO), which develops, manufactures and markets pharmaceutical products for humans and animals worldwide. Alpharma, which is currently trading with a forward P/E of 38, rejected an unsolicited offer from King Pharmaceuticals (KG) for $37 per share because the offer is “inadequate” and not in the best interest of shareholders.
For more activist ideas, including Epicor (EPIC) and Hill-Rom (HRC), check out the Latest Activist Situations portfolio and the latest activist filings from Barron’s.
Updated from Oct. 20, 2008
