By Stockpickr Staff
Posted at 11:27 a.m. EDT on April 2, 2009


A company can blame its poor financial performance on a slow economy, world politics -- even the weather. But an investor with a large economic position in the company can hold the company accountable by turning to shareholder activism as a way to increase shareholder value.

Despite the worst bear market since the 1930s, activist investors such as Warren Buffett, Bill Ackman of Pershing Square Capital Management and Carl Icahn by all accounts are still finding attractive valuations both on the long and short sided of the equity market.

At Stockpickr, we follow the latest activist situations for investors interested in piggybacking of these activist investors.

Obrem Capital, which owns 13.5% Micrel (MCRL), has agreed not to attempt to replace the company's board of directors through the 2010 annual meeting so long as Micrel continues its efforts to improve operating and gross margins within the relative confines of the economy.

Recently, Obrem wanted to remove the current board of directors and hold a special meeting to vote on its proposed slate. It also wanted the company to sell itself, arguing that shares were "substantially undervalued."

At the start of the year, Micrel fired about 6% of its work force as it lowered sales and profit estimates for the fourth quarter of 2008. Micrel said it expects revenue for the quarter to decline 18% to 20% from the third quarter because of fewer-than-anticipated orders in late November and December. Moreover, Micrel now projects earnings of 6 cents to 8 cents per share, down from a previous estimate of 8 cents to 11 cents and slightly below the Wall Street estimates of 8 cents per share.

Micrel has $75 million in cash and zero debt. It is also worth pointing out that Micrel CEO Zinn Raymond owns about 15.6% of the company.

Micrel was trading up 5 cents at $7.07 on Thursday morning.

According to public filings, Obrem Capitals top three equity holdings are Micrel, MDS (MDZ) and Employers Holdings (EIG).

The battle between MMI Investments and Chemed (CHE) is heating up after MMI criticized the company for “excessive compensation” and “a culture of entrenchment.” MMI, which is pushing Chemed to spin off its Roto-Rooter business from its Vitas health care business, has advanced its own slate of directors to Chemed’s board.

According to MMI, these industry executives "will bring expertise and objectivity to Chemed, not derive their livelihood from it.” According to activist documents, MMI cash benefits have totaled $21 million over five years for Chemed’s five highest-paid officers.

In a recent letter, MMI stated that subject to certain valuation assumptions, the potential outcome of a spinning-off of Roto-Rooter may yield a stock price of more than $55 to nearly $62 on an independent trading basis, and more than $68 to nearly $71 per share if both businesses were subsequently taken over.

As of 2007, Vitas, Chemed’s end-of-life care business, generated 69% of the firm’s total revenue, while Roto-Rooter, Chemed’s plumbing business, generated 31%.

For the fourth quarter of 2008, Chemed reported net income of $19 million, or 84 cents per share, compared with $20.2 million, or 83 cents per share, in the year-ago quarter. Chemed also said the stimulus package passed by Congress provides for an increase in the Medicare hospice wage index from Oct. 1, 2008, through Sept. 30, 2009. Chemed estimates that this will add about $8 million in additional revenue to Vitas.

Chemed also believes that Roto-Rooter will see revenue growth in the 4%-to-5% range due to increased prices and a shift to more expensive jobs. For full-year 2009, Chemed now expects earnings per share in the $3.70-to-$3.95 range.

On Thursday morning, Chemed was up a dollar, or 2.5%, at $41.59.

On March 20, Silverstone Capital sent a letter to Midas (MDS) requesting that the company remove its poison pill or put the matter to a shareholder vote at the next annual meeting. In the letter sent by Silverstone, the hedge fund, which specializes in the automotive services sector, said: “We are not interested in a fire sale of the company, nor is this request a criticism of management. We merely would like to see shareholders rights restored.”

Silverstone Capital owns approximately 1.2 million shares of Midas. Midas was up 48 cents, or 5.6%, at $9 in Thursday morning trading.

On March 23, Dodsville Investments sent a letter to the largest producers of yellow pages, RH Donnelley, stating the firm’s belief that the company is grossly undervalued and the management must take steps to unlock its true value.

Recently, RH Donnelley’s problems have stemmed from mammoth $10 billion in debt vs. its current market capitalization of just $20 million. However, in a letter sent to the board of directors, Dodsville states that the market is valuing Donnelly as if it had no other option than to go bankrupt.

Dodsville highlighted the company’s ability not only to service its debt obligations with cash flow from operations but also to buy back its stocks and bonds on the open market. In addition, Dodsville believes Donnelley should pay shareholders a dividend equal to 40 cents per share before the buyback is implemented.

If you believe the credit and debt markets will improve, RH Donnelley is the play.

For more activist investing ideas, including Target (TGT) and Websense (WBSN), visit the Latest Activist Filings portfolio on Stockpickr.

Who's on Stockpickr Answers? Kevin Baker will be on Stockpickr Answers on April 2 to respond to investing and trading questions posed by members of the Stockpickr community. Not a member? Join the Stockpickr community today -- free.