Most hedge funds are drastically underperforming the markets this year. In fact, since 2004, most hedge funds have actually underperformed the boarder markets, despite the huge bull market in stocks.

Since most hedge funds get paid based on their returns for the year, managers who do not want to underperform are turning 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 these activist funds. We highlight a few of them here.

Infamous hedge fund Third Point LLC disclosed recently that it has bought 6.8% of Phoenix (PNX) stock and wants the board to hold CEO Dona D. Young "accountable for the company's underperformance and seek new leadership."

Third Point said in its regulatory filing that "it would be in the best interests of the company's shareholders and policyholders if the company's operations were combined with those of another insurance company" in a deal that reflects the "substantial embedded enterprise value of the company."
Shares of Phoenix, which provides life insurance, annuity and investment products in the U.S., are down about 50% year over year despite currently trading two times below its stated book value of $19.76 per share.

Jukka Lipponen, a senior vice president and analyst at Keefe Bruyette & Woods, said: “"When you have share price depressed as with Phoenix, it invites this sort of thing."

Phoenix has a short position of 8.2%, EV/EVITDA of 7.5 and forward P/E of 8.

Next on the list is Investors Capital Holdings (ICH). Robino Stortini Holdings, a hedge fund managed by Charles Robino and Michael Stortini, said it will seek effective or actual control of Investors Capital Holdings. Robino Stortini will consider purchasing all or a portion of Investors Capital's common shares held by its controlling stockholder in a negotiated transaction, or try to obtain a majority stake through a tender offer.

Investors Capital, which provides a diversified line of financial services to the public, is down about 20% for the year.

Next up is Maguire Properties (MPG). JMB Capital Partners Master Fund intends to nominate a slate of candidates to replace at least a majority of the Maguire Properties board at the 2008 annual meeting slated for Oct. 2. JMB Capital said that this is an effort to “provide the company with a board free from involvement with issues inherited from prior management.”

Maguire Properties, a real estate investment trust, engages in the ownership, management, acquisition and development of office and real estate properties primarily in California, which we all know is in a deep housing recession. JMB Capital holds 4,650,000 shares (9.7%).

In a separate filing involving Maguire, New York hedge fund manager Daniel Loeb of Third Point urged the property company's board to take the necessary steps to facilitate its sale. Loeb said he won't support a board that doesn't exercise its fiduciary obligation to maximize shareholder value and will take whatever steps required to protect and maximize his investment in the company.

Maguire Properties recently rejected a $20.25-a-share buyout offer from a private real estate company, Pacific Office Properties Trust, saying that the proposed deal "was not in the best interest of shareholders." Loeb, through his Third Point fund, holds 4,225,000 shares (8.8%).

Maguire Properties is down about 75% year over year and sports a massive short position of 31%.

And finally we have Sally Beauty Holdings (SBH). Sageview Capital is in discussion with Sally Beauty management and may make suggestions concerning the beauty company’s operations, prospects, business and financial strategies, assets and liabilities.

Sally Beauty, which is down about 25% year over year, has a short position of 15%.

For more activist ideas, including Take-Two (TTWO), Collective Brands (PSS) and Alliance Data Systems (ADS), please check out the Latest Activist Situations portfolio, which we update regularly with the latest activist situations.

Also, here are the latest activist filings from Barron’s, including Barrier Therapeutics (BTRX).


A note from James Altucher:

Every weekend I send an email to Jim Cramer and several hedge fund managers about the most interesting portfolios posted on Stockpickr that week. Usually those portfolios not only list stocks according to a theme but also offer significant analysis as to why the stocks are cheap.

Here are some examples:

Stocks related to drilling the Marcellus Shale

MLPS with yields above 7%

Microcaps trading for less than tangible book

Stocks that do well after Hurricanes

Here's the challenge: Build a portfolio at Stockpickr.com with great analysis, and send me the link. Each great portfolio (with analysis) will get posted on TheStreet.com with your byline (as a "Stockpickr Guest Columnist") and will be included in my email I send to Jim and the other
hedge fund managers on my list.


Posted July 30, 2008