SEC filings are the lifeblood of companies - they contain everything investors need to know to make informed decisions (unless the company illegally witholds the information!). Despite this, many investors ignore these filings and/or fail to realize how they can be used to profit. So, in the interest of creating more informed investors, here's a list of the five most important filings to watch:

1. Schedule 13D & 13G – This filing will let you know when a mutual fund, hedge fund or other entity acquires a 10% stake in a company. Often times when companies are undervalued, activist hedge funds will start acquiring a stake in the company in an effort to convince management to unlock shareholder value through a sale, special dividend, share buyback or other similar measures. Occasionally, these forms can also tip you off to potential acquirers purchasing a large amount of shares before making a tender offer for the remaining shares. Either way, these situations happen when huge shareholders are unhappy and want quick money - which presents great opportunities for those willing to tag along for the ride!
   
2. Form 3 & 4 – This filing is one made by directors, officers and 10% owners of the company. Insider buying – that is, when directors and officers purchase large amounts of shares – often occurs before a positive event for the company. For example, insiders may purchase many shares ahead of a blowout earnings announcement. These filings can also foreshadow other positive events, like potential takeover bids or other favorable events. Insiders know more than everyone else, so following their lead is usually a good idea!
   
3. Form 10-12B – This filing is the one for spin-offs – in particular, it details the spin-off terms and other company details. Spin-offs are very useful to watch because they typically outperform the market in their first year. This often happens because parent company shareholders usually are not interested in the spin-off and therefore dump their shares, which causes the stock to become undervalued. Watching these forms can tip you off to some great opportunities!
4. Form 8K – These filings are extremely important to watch because they detail material current events relating to the company. Whenever there is something worth announcing that cannot be classified in another form – this one is used. These things can include press releases, shareholder letters to management, litigation, SEC investigations, and other similar events. Many opportunities present themselves through these 8Ks!
5. Form 10K – This is the annual report for a company. Now, the numbers aren’t necessarily the most important part; instead, the notes at the end of this document occasionally contains the most interesting material. This can include future forecasts, status on litigation, future company plans or other material similar to that in the 8K. The information found in 10Ks can be extremely useful in coming up with a fair value for a stock!
   

It can be tedious to constantly check for new SEC filings via the SEC's EDGAR service, so I would recommend using a service like SECFilings.com to subscribe to free e-mail alerts when certain filings are made (they also have RSS and other options). You can setup alerts for companies you own, or companies in general, so you can always stay on top of the market!

Sara Lee Corp's (NYSE: SLE) spin-off of Hanesbrands, Inc. (NYSE:HBI) was completed today as the new company begins its first day of trading. Hanesbrands initial 10-12B filing with the SEC provides an overview of the new company:

"Although we are a newly independent company, our product portfolio includes some of the most recognized apparel essentials brands in the United States, including Hanes, Champion, Playtex, Bali, Just My Size, barely there and Wonderbra. We design, manufacture, source and sell a broad range of products such as t-shirts, bras, panties, men’s underwear, kids’ underwear, socks, hosiery, casualwear and activewear. In fiscal 2005, we generated $4.7 billion in net sales and $359.5 million in income from operations. Our mission is to create value for you, our stockholders, and for our customers through effective supply chain management, competitive prices, high quality and service excellence. Our strong brands and dedicated employees will drive this value."

Spin-offs outperform the overall market in most cases. This is because when shares are distributed to parent company shareholders, they often times immediately sell the shares, for a variety of reasons. This creates a windfall that ultimately results in a stock that is below its true value - which is a great buying opportunity for investors. Moreover, this company has a great, recognizable brand name, solid financials, and a great management team. Combined, these factors make HBI a stock worth watching.

Nabi Biopharmaceuticals (NDAQ:NABI) revealed in an amended 13D filing with the SEC today that activist hedge fund Third Point had contacted the company to make several demands. According to the filing, these demands included:

"(1) to investigate and, we believe, confirm that the members of the board of directors of the Company have engaged in gross mismanagement in managing the affairs of the Company, (2) to investigate and, we believe, confirm that such members breached, and are continuing to breach, their fiduciary duties to the Company and its stockholders, (3) to determine whether to conduct a proxy contest to replace the members of the board of directors and (4) to determine whether to commence litigation against such members for breaches of fiduciary duty, among other wrongs. These purposes are reasonably related to the Stockholders' interests as stockholders of the Company."

 These demands stem from years of mismanagement that led to the company's 50% haircut late last year and the continued dismal performance of NABI stock to date. The letter to management (attached to the filing) provides further reasoning behind the demands:

"The Stockholders believe that the board of directors of the Company has grossly mismanaged the affairs of the Company and has engaged, and is engaging, in breaches of fiduciary duty contrary to the interests of stockholders ... the Stockholders believe that the granting of stock options to certain members of management in February 2006 was deliberately and wrongfully timed to maximize the economic benefit to the option grantees and was contrary to the interests of stockholders. In addition, Stockholders believe that the directors have ignored, and are continuing to ignore, the will of the majority of the Company's stockholders, and are embarked on a scheme to entrench themselves in office for as long as possible and to maximize the personal financial benefits to themselves during their remaining tenure at the expense of the Company and its stockholders. The Company's board of directors has paid mere lip service to the interests and wishes of its stockholders, and has refused to engage in substantive dialogue concerning the gross mismanagement over which they have presided."

This is certainly an interesting development as investors are increasingly frustrated with the poor performance of the company. If Third Point can successfully obtain the information they desire it could lead to durastic measures, which could include a proxy battle and/or litigation against the company's management among other things. Either way, this is a great stock to keep on the radar as the situation develops.

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Parlux Fragrances Inc. (NDAQ:PARL) announced in a press release today that it had received a letter from Glenn Nussdorf stating that he had acquired 5% of the company's shares on the open market and seeking authorization to purchase additional shares that may exceed 15% of the company. This transaction is interesting because Mr. Nussdorf owns a majority interest in E Com Ventures, Inc. (NDAQ:ECMV), which is a major Parlux customer. Now, Mr. Nussdorf could have continued to acquire shares without seeking authorization, but this would have prohibited him (or his associates) from doing business with Parlux. By asking the Board to grant him Interested Stockholder Approval as defined in Section 203 of the Delaware General Corporation Law (DGCL) he is opening the door to business transactions, which could include a potential merger or buyout of PARL by E Com Ventures. PARL's Board convened in a special meeting today, which approved the transaction provided that no shares were purchased from Directors. This stock is definitely worth keeping a close eye on as Mr. Nussdorf begins acquiring more shares. Shares are up 12% today on the news.

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The Brinks Company (NYSE:BCO) is a security company that has recently found itself in Pirate Capital's crosshairs. In early August, the company acknowledged the receipt of a letter from Pirate requesting that the company put itself up for sale. Mr. Hudson - managing partner of Pirate Capital - contends that a sale of the company would attract "substancial" interest given the Brinks market leadership, and would likely receive offers between $68 and $72 per share. This would represent a 19% to 26% premium over today's price. The Board responded positively on August 9th in an 8K filing with the SEC stating that the Board would take the request into consideration. Pirate has been acquiring the stock since its February 13D filing with the SEC. Interestingly, another activist hedge fund also holds an ownership stake in the company - Steel Partners. These funds hold a combined 15% of the company and are not adverse to forcing changes in large companies.

Brinks is definitely a stock worth keeping an eye on. With such large activist holdings and an asset valuation of around $68 per share, this company is fundamentally undervalued and it has a catalyst the help unlock this value in the short-term.

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McDonalds Corp. (NYSE:MCD) found itself back in activist investor Bill Ackman's crosshairs after the company's move to reduce its holdings in Chipotle Mexican Grill through a stock swap. The company disclosed in an 8-K filing earlier today that Ackman's Pershing Square Capital Management would increase their McDonald's common stock holdings by almost $800 million after the swap.

Last year, Ackman pressured the company to spin off 65% of their owned restaurants in a stock offering, but backed off after McDonalds agreed to $1 billion stock buyback and other measures designed to increase shareholder value. Ackman's fund was also actively involved with Wendy's (NYSE:WEN) restructuring, which included the spin off of their Tim Horton's (NYSE:THI) chain. With these new shares, many investors are speculating that the activist investor will step in again to encourage the company more actively unlock shareholder value.

Whether this materializes or not, when an activist hedge fund discloses an $800 million stake in the company it's something worth watching closely.

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Gateway Inc. (NYSE:GTW) announced today that it would reject John Hui's $450 million bid for the retail operations of the company. Management and the board of directors maintained that the transaction would not be in the best interest of shareholders. Shortly after the announcement the stock moved down 2.5% to settle at $1.95 (where the buyout premium is now at 11%). The company did not address a seperate offer by Hui to potentially acquire all outstanding shares in the company at an unspecified price.

Earlier this year, the company retained Goldman Sachs as a financial advisor to help the company enhance shareholder value. Moreover, a recent 13D filing with the SEC also revealed that Gateway stock has been heavily accumulated by Harbert Management Corp. According to the filing on August 21, 2006, the fund "submitted a letter to the Issuer's Chairman and interim CEO to offer the board and management assistance in their efforts to enhance shareholder value". The filing does not indicate that the hedge fund would seek any extraordinary measures such as the liquidation of the company, sale of the company, or other similar measures.

With the possibility of a future bid for all of the company's shares by Hui, along with the restructuring help of Harbert and Goldman Sachs, Gateway is certainly a company to keep a close eye on as they attempt to improve shareholder value.

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Medtronics Inc. (NYSE:MDT) has found itself abound in rumors recently. The company told shareholders at last Thursday's annual meeting that the company was not for sale, despite rumors that Johnson & Johnson was preparing a bid. Medtronics CEO Art Collins insisted that the company had not been seeking a buyer; however, despite this rebuke, the possibility for a takeover bid still exists. The idea of a possible buyout came as a result of the company's sliding stock price, which dropped from $60/share earlier this year down to its current range in the $40s. The company attributed this drop to the industry-wide recall of cardioverter defibrillators along with reduced coverage of medical devices by government programs and lower ICD revenues. Typically, when companies experience such drops, they become vulnerable to buyout offers and even hostile takeover bids.

Interestingly, on August 28th three company directors purchased or acquired large blocks of shares at market close. These transactions included the acquisition of over 1,500 shares, an open market purchase of 1,000 shares, and a string of open market purchases totaling 25,000 shares. The transactions all occurred on August 24th - the day of the annual meeting. Are these insiders simply making regular purchases based on the notion that their company will perform well in the future, or do they know something? Although there is an absence of call options (which are the most telling indicator that mangement knows something that would affect the price in the short-term), the purchases do raise question especially since this is the first instance of open market purchasing (as opposed to acquisition) in several months. This is definitely a stock to keep an eye on...

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Bally Total Fitness (NYSE:BFT) recently announced, in an ammended 13D filing with the SEC, that they had signed a confidentiality agreement with activist hedge funds Liberation Investments and (earlier) Pardus Capital. According to the most recent filing:

"On August 28, 2006, a representative of LIGLLC executed a confidentiality agreement (a copy of which is attached hereto as Exhibit 99.34, the “Confidentiality Agreement”) with the Company pursuant to which the Company agreed to make available to LIGLLC and certain of its representatives on a confidential basis certain information (the “Evaluation Material”) of the Company, including, without limitation, information relating to the Company’s business, products, markets, condition (financial or other), operations, assets, liabilities, results of operations, cash flows and prospects."

So, why do they want this information?

"Following their review of the Evaluation Material, the Reporting Persons may determine to attempt to arrange or participate with third parties in an extraordinary corporate transaction with respect to the Company, such as an acquisition, a sale of all or substantially all of the Company’s assets, a reorganization, a recapitalization, or a significant debt or equity investment."

These hedge funds have a long history with Bally: Last year, the two hedge funds launched a proxy battle to gain control of the board - a battle eventually led to ousting of then-CEO Paul Toback and the appointment of two Pardus-supported board members. The company then made an unsuccessful attempt to put itself up for sale. Meanwhile, Bally's shares plummeted to under $3/share from a high of $9/share just a month earlier. This freefall was the product of poor operating results posted at the end of July along with the uncertainty surrouding the company's future.

Now, with these latest confidentiality agreements, the hedge funds will have more indepth access to the company's financial condition to either put it up for sale or begin a restructuring plan. Given the fact that Bally's stock is near a 52-week low right now, a possible buyout is the most likely of the two. If the hedge funds are successful, it could be a substancial gain; however, there is always the risk that the hedge funds will simply bail on the investment and cut their losses (like Pirate Capital did to OSI not long ago!). So far investors have applauded these announcements, bringing the stock up nearly 15% since the original announcements. Though this is purely speculative at the moment, it is a great stock to keep an eye on and perhaps play with longer-term options.

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Educate Inc. (NDAQ:EEEE) announced yesterday in an 8-K filing with the SEC that they had sold off their Education Station business segment in an $18 billion deal. The business segment, which helped public schools comply with the No Child Left Behind Act, was sold for $6 million with another $12 million being paid for software licensing and support. The business unit has long been a drag on the company's earnings despite increasing revenues. The stock moved up 11% in today's trading as investors applauded the move, which should help the company follow through with its turnaround plans that caused so much difficulty last quarter. The stock is currently being heavily traded by technical analysts; however, if the turnaround is successful, it may become a decent play for fundamental investors as well.

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