Cost Plus, Inc. (NDAQ:CPWM) - more commonly known by its brand name "World Market" revealed today in a 13D filing that Red Mountain Capital Partners LLC had taken a 6.2% stake in the company.

In the filing, they noted:

"Red Mountain acquired the Common Stock reported in this Schedule 13D for investment purposes because it believed that the Common Stock was undervalued and represented an attractive investment opportunity.

Red Mountain has met with the management of Cost Plus and expects to maintain a dialogue with management regarding, among other things, Cost Plus’ operations, strategic direction, capital structure and corporate governance and Red Mountain’s expectation that management will pursue appropriate measures to enhance shareholder value. In addition, Red Mountain may communicate with other persons regarding Cost Plus, including, without limitation, the board of directors of Cost Plus, other shareholders of Cost Plus and potential strategic or financing partners.

Red Mountain may, at any time and from time to time, take such actions with respect to its investment in Cost Plus as it deems appropriate, including, without limitation, (i) proposing measures which it believes would enhance shareholder value, (ii) seeking representation on the board of directors of Cost Plus, (iii) purchasing additional Common Stock or other securities of Cost Plus, (iv) selling some or all of any securities of Cost Plus held by Red Mountain, (v) proposing, whether alone or with others, a transaction that would result in a change of control of Cost Plus, or (vi) otherwise changing its intention with respect to any of the matters referenced in this Item 4."

This is good news for shareholders of the stock, which has declined from $40 in early 2004 down to its current levels of around $11 per share. Currently the company is trading below its enterprise value of $15.16 per share with a forward P/E of 21x. Any further improvements in the company's bottom line and capital structure would make it substancial undervalued - possibly even a potential buyout target, given the company's market reach. This is definitely a stock worth keeping an eye on!

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