Angelica Corporation (NYSE:AGL) may face more heat from Pirate Capital's Thomas Hudson after the activist hedge fund disclosed a 9.8% stake and expressed strong disappointment with the company's operating results. The Chesterfield, MO-based company recently posted a first quarter loss of $1.14 million on revenues of $107.8 million compared to a loss of $1.5 million on $107 million during the same period last year.

The largest concern that many shareholders have is the disconnect between the intrinsic value of the company and the current market valuation of its shares. Specifically, many are concerned that the aggregate price of Angelica's 11 bolt-on acquisitions between 2003 and 2006 is substantially higher than the value that the market currently assigns to these assets. The company ended up paying 1x sales while the company remains valued at just 0.5x sales. Clearly this is a problem with either the market's mis-valuation or management's recklessness.

Pirate Capital is a well-known activist hedge fund but had some troubles in the past when lackluster returns led to multiple limited partners pulling their money out of the fund. The hedge fund is now trying to turn itself around, however, amid a healthy M&A market that has seen more deals than ever before. While Pirate Capital never indicated that they were specifically seeking a sale, the hedge fund did say that they would actively pursue strategic alternatives. Combined, these factors make AGL a stock worth watching!

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