Gold Kist Inc. (NDAQ:GKIS) announced today that it had hired Gleacher Partners LLC to assist it with a review of its strategic plans aimed at maximizing shareholder value. This group will be added to the already lengthy list of advisors, including Merrill Lynch, Alston & Bird. All of this comes as a result of an unsolicited buyout offer from Pilgrim’s Pride Corp (NYSE:PPC) valued at $20 per share in cash on August 21st. More recently, the company also disclosed via a 13G filing with the SEC on August 31st, that Citadel had upped its stake in the company to 6.9%. Note that Citadel is one of the world’s largest hedge funds, with an impressive track record and a bias towards activism.

So, what happens next? Well, considering the bid from Pilgrim's represented a 50%+ premium to the market close (in a market where many of the major players have suffered large losses on the year) many thought that they would take the offer in a heartbeat. However by hiring an additional advisor today, the company hinted that it would not be that simple. Many are speculating that the company may solicit other bids to see if a higher premium can be attained via an auction process. One thing is for certain, however: With a hedge fund like Citadel behind the scenes, it is highly unlikely that the company will reject the idea of a buyout.  

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Pilgrim's Pride Corp (PPC)

Goldman Sachs Group, Inc. (NYSE:GS) released another impressive earnings report in an 8K filed with the SEC today. This announcement comes after investors have seen the stock decline by 10% since its record last quarter, just on fears that the company wouldn’t be able to maintain its impressive growth. However, despite a seasonal slowdown in trading revenues, the investment bank still beat the street estimates, earning $3.26 per share against a $2.97 consensus.

Highlights featured in an attached press release included:

• During the third quarter, Goldman Sachs surpassed its previous annual record for net revenues and earnings per common share.
• The firm continued its leadership in investment banking, ranking first in worldwide announced and completed mergers and acquisitions, equity and equity-related offerings and public common stock offerings for the calendar year-to-date. (3)
• Fixed Income, Currency and Commodities (FICC) generated its third highest quarterly net revenues of $2.74 billion.
• Assets under management increased to a record $629 billion, 21% higher than a year ago, including net asset inflows of $30 billion during the quarter.
• Securities Services produced its second best quarterly net revenues of $537 million.
  

So, will this growth continue? Well, the company announced that it would buyback an additional 60 million shares which certainly shows a lot of confidence. Moreover, the 8K also mentioned that the company’s strong backlog remains strong and shows no signs of slowing down. The company has great management that has consistantly shown its ability to outperform. With a share price down 10% on speculation that this quarter would be bad, this may be a good time to pick up some shares after this notion was proven wrong. Other companies to watch include competitors Lehman Brothers (LEH), Bear Stearns (BSC), and Morgan Stanley (MS) - all due to announce their own results over the next week.

Related Companies
Lehman Brothers Holdings, Inc. (NYSE:LEH)
Bear Stearns Companies, Inc. (NYSE:BSC)
Morgan Stanley (NYSE:MS)

Activist hedge funds play a large role in the modern marketplace - we can hardly go one day without hearing the phrases "strategic alternatives" or "maximize shareholder value" mentioned in 13D filings with the SEC! The sheer number of leveraged buyouts, private equity buyouts, corporate takeovers, proxy battles, restructurings, liquidations and other shareholder-led corporate activity has increased dramatically during the past few years and shows no signs of slowing. As a result, it is becoming increasingly important for individual investors to learn the many players involved with these types of deals in order to know how to react when their portfolio companies are affected by these groups.

The SEC Investor will begin profiling several hedge funds during the coming weeks in order to reveal who exactly is behind each funds, what types of investments they are involved with, and most importantly, where to find information about their investments and objectives within SEC filings. Armed with this information, investors can not only be more secure in their own investments, but also find new opportunities to quickly profit in today's market.

Here is a shortlist of the funds that we will be profiling:

• Appaloosa Management
• Bulldog Investors
• Cannell Capital
• Carlos Slim Helu
• Cevian Capital
• Children's Investment Fund Management
• ESL Partners (Mr. Lampert)
• Harold Simmons
• Icahn, CCI (Mr. Icahn)
  
• Liberation Investment Group
• Pardus Capital Management
• Perry Corp
• Pershing Square Capital Management
• Relational Investors
• Richard Blum
• Schultze Asset Management
• Steel Partners
• Third Point
• Tracinda Corp (Mr. Kerkorian)
• Trian Group

* Note that this list represents a mere fraction of the number of activist hedge funds in existence; however, these are the funds that typically target the largest companies (affecting the most shareholders).

Scottish Re Group Limited (NYSE:SCT) shares jumped over 10% today as the company updated investors on its "strategic alternatives". The company first ran into trouble in July after it blindsided investors with wide losses for the second quarter due to "lower than expected new-business volumes, higher than anticipated retrocession costs and income-tax expense due to the inability to recognize future deferred-tax benefits". This, combined with the resignation of the CEO and various profit warnings, caused the stock to drop over 75%. Since then, the stock has regained some ground after the company confirmed that it would be able to remain solvant. Moreover, the company announced that it would begin the auction process to put itself up for sale in addition to acquiring further financing in order to remain liquid.

Today, the company announced that it had succeeded in both of its goals. Scottish Re announced that it had received proposals from a number of potential bidders last Friday, along with three written proposals for possible financing (between $150 - $250 million). Considering the fact that the stock was trading at $16 shortly before the second quarter earnings were reported and $25 earlier in the year, many investors are speculating that the buyout offers may be significantly higher than the stock's current levels. This is optimism is further driven by SCT's impressive cash flow. Moreover, the fact that there are several bidders opens up the doors to a potential bidding war. So, what's the downside? The company said that it expects its former executives to sell their stock, which includes stock options (that must be exercised within 60 days of their departure) and shares held in their 401k plans. Whether or not they sell remains to be seen. Either way, this stock is a great one to keep an eye on as these events unfold...

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IPC Holdings Ltd. (IPCR)

U-Store-It Trust (NYSE:YSI) is an REIT (real estate investment trust) operating in the self storage unit space. The company has recently undergone several changes aimed to help the company recover after falling from $22 in April down to $16 in June. The company announced today in a series of Form 4 filings with the SEC that its CEO Dean Jernigan purchased a total of 195,000 shares (or about $3.9 million) on September 5th and 6th at an average cost of $19.88. Analysts applauded the move with Merrill Lynch's Christopher Pike maintaining his target of $21 saying that they "believe that an operational turnaround is far from fully priced into U-Store-It's stock".

Related Company
Extra Space Storage, Inc. (EXR)
Public Storage, Inc. (PSA)
Sovran Self Storage, Inc. (SSS)

Metropolitan Capital disclosed a 7% stake in Cyberonics Corporation (NDAQ:CYBX) today in a 13D filing with the SEC. The hedge fund also enclosed a lengthy letter stating their intention to nominate three candidates to the company's Board of Directors, with the support of the shareholder group Committee for Concerned Cyberonics Shareholders. In the letter, Metro elaborates on several critical issues facing the company, reasoning that "if there was ever a question about the need for change at Cyberonics, recent events have provided an emphatic answer ... Our nominees will provide a much needed independent voice in the Boardroom, which will represent the start of the process of rebuilding shareholder value." (Read the rest of the letter)

Metro was first involved with Cyberonics six years ago, when Medtronics (NYSE:MDT) offered to buyout the company at $26 per share. Mr. Cummins, the past and current CEO of the company, implored Metro to reject the offer, saying that he would be able to generate more value over the long-term. Metro agreed and the offer fell apart. This turned out to be a bad move as shares have declined over 50% so far this year alone. Meanwhile, Mr. Cummins has profited handsomely from over $17 million in options grants and even more in restricted shares. Even more appaling is the fact that the Board granted Mr. Cummins stock options on the same day as an FDA approval of the company's primary product, which resulted in an overnight gain of over $2 million - not bad for a days work! Despite the CEO's poor performance and questionable ethics, the Board of Directors went so far as to contract Mr. Cummins for an additional five years with the company and institute a 50% pay raise.

Clearly change is needed in this company, and Metropolitan Capital is taking the steps to enforce it. Whether or not they can salvage the company depends on many factors. Even if they successfully obtain the three seats on the Board, the group will likely face a proxy battle to remove Mr. Cummins and also be forced to pay contract termination fees and a plethora of other costs. In the long term, however, this move could help the company turn itself around and provide significant returns to shareholders.

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Medtronics, Inc. (MDT)
Biomet, Inc. (BMET)
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Autobytel Inc. (NDAQ:ABTL) is an automotive marketing services company that brokers and facilitates the sale of automobiles through the Internet. They own several web portals, provide customer relationship management software and services, and help with data and lead generation services. The company's stock has been slowly declining since 2004 when it reached an all-time high of just under $15. Currently, the stock is trading at just over $3/shares after a 13D filing with the SEC revealed that their largest shareholder - Liberate Technologies - was seeking immediate change to maximize shareholder value

The lengthy letter attached to the 13D filing gave an overview of Liberate's position:

"We are one of Autobytel's largest shareholders. We invested in Autobytel because the company is positioned for significant upside and could become the leading online automotive firm.

However, the company is also at a crossroads. We believe that the company has three strategic choices. First, the company could move immediately to restructure its business, streamline its operations, reform its corporate governance and position itself for future growth. Second, it could engage in a sale process to maximize near-term value for shareholders. Or third, it could continue down the current path, and make no significant tactical or strategic adjustments.

We believe the first path leads to the greatest shareholder value over time and we strongly recommend it. But if the board is unwilling to implement change, then the company should immediately pursue a sale process. The third path will simply be a continuation of the last seven years - a steady destruction of shareholder value."

Shareholders applauded this move as ABTL stock rose 18% in mid-day trading. This level of support is encouraging because it may force management into changes, and also increases the chances of a successful proxy battle, if it came down to that. Although the stock may be a little overpriced in the short-term right now, it is certainly worth keeping an eye on as this story develops.

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Finish Line Inc. (NDAQ:FINL) is a mall-based specialty retailer of athletic, lifestyle and outdoor footwear. Recently their stock has caused some concern among investors after sliding from $18 to below $12 during the past four months. This drop came as a result of lower than expected earnings and sales numbers during the last few quarters. The drop has prompted one of their largest shareholders and activist hedge fund, the Clinton Group, to petition the Board to seek strategic alternatives in a recent 13D filing with the SEC. In a letter attached to the filing, the group said:

"We have invested in Finish Line because we believe the market price of Finish Line shares fails to reflect the true earnings power of the traditional Finish Line concept stores, management's ability to turnaround the recent same store sales trends, the potential for margin improvement and realization of operating leverage and the value potential of the Man Alive and Paiva concepts. Further, we departed our meeting with a greater sense that such beliefs are indeed accurate.

While we are supportive of management as operators of the business, we are writing this letter to encourage your board to take immediate steps to enhance shareholder value. Today, we choose to highlight the following as initial steps that the board should do to enhance shareholder value: (1) eliminate the unfriendly shareholder corporate governance structure including the dual class voting structure, (2) commence a Dutch tender offer in conjunction with a modest senior debt financing, and (3) to the extent the share price continues to languish, engage a reputable investment banking firm to explore strategic alternatives including, but not limited to, a going private transaction or an outright sale of the Company."

Currently, Finish Line is trading at a low 11x earnings (industry 16x) with no debt and a sizable $72 million (or $1.30 per share) in cash which would make them an attractive target to any potential acquirer. The Board's response remains to be seen; however, with the stock up over 8% in early trading today, it is definitely a situation that warrants keeping an eye on.

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A recent S&P 500 research report showed that corporate buybacks have risen to a record $116 billion in the second quarter this year, up 175% in only two years. Put another way, this number is very close to index companies' capital expenditures during the same period! This comes as a byproduct of another trend in corporate America - record amounts of cash in the bank, which has caused many companies to face more and more difficulty justifying the amount of cash they have tucked away. As a result, many investors are demanding that more be done to maximize shareholder value in the form of dividends and share buybacks. This is a good things for investors as it causes less shares to be on the market, which (in theory) increases the stock price.

Here are a few companies that recently announced buybacks:
Pep Boys (NYSE:PBY) - $100 million
Cascade Corporation (NYSE:CAE) - $80 million
Shuffle Master (NDAQ:SHFL) - $30 million
Sunco (NYSE:SUN) - $1 billion
Amazon.com (NDAQ:AMZN) - $500 million

Hewlett-Packard Company (NYSE:HPQ) announced yesterday in an SEC filing that Thomas J. Perkins had suddenly resigned from the Board of Directors. In his mandatory filing with the SEC in the event of a resignation, he expressed concern over the way HP was handling investigations designed to uncover individuals leaking news and trade secrets. This announcement forced HP to reveal its entire investigation, which has been causing controversy on the street. In their 8K filing with the SEC, HP stated their case:

"HP has been the subject of multiple leaks of confidential HP information, including information concerning the internal deliberations of its Board of Directors.  HP believes these leaks date back to at least 2005.  In response to these leaks, outside legal counsel conducted interviews of directors in early 2005 in order to determine the source of the leaks and to obtain each director’s reaffirmation of his or her duty of confidentiality.  The interview process did not yield the source of the leaks.  Notwithstanding these actions, the leaks continued.  As a result, the Chairman of the Board, and ultimately an internal group within HP, working with a licensed outside firm specializing in investigations, conducted investigations into possible sources of the leaks of confidential information at HP.  Those investigations resulted in a finding that Dr. George A. Keyworth II, one of HP’s directors, did, in fact, disclose Board deliberations and other confidential information obtained during Board meetings to the media without authorization.  At a Board meeting on May 18, 2006, after Dr. Keyworth acknowledged that he had leaked confidential information, the Board, after deliberation, asked Dr. Keyworth to resign his position as a director, which he declined to do.  It is at that meeting that Mr. Perkins resigned from the Board after expressing personal frustration with the Chairman of the Board relating to the handling of the matter with the Board.  He stated that he objected to the matter being brought before the full Board and that he believed the Chairman had agreed that he and she would handle the matter privately.  The Chairman disputed Mr. Perkins’ assertion, explaining that she was complying with advice from outside counsel on the appropriate handling of the matter.  At the time, Mr. Perkins confirmed he did not have any disagreement with HP on any matter relating to HP’s operations, policies or practices."

But there was one line which caused so much controversy:

"HP informed Mr. Perkins that no recording or eavesdropping had occurred, but that some form of 'pretexting' for phone record information, a technique used by investigators to obtain information by disguising their identity, had been used."

Apparently, HP had hired an outside investigative firm to obtain the information. Pretexting occurs when someone pretends to be someone else in order to obtain information. For example, to obtain phone records, an investigator may call the phone company pretending to be a customer by giving false credentials and personal information. Although this technically not illegal on a national level, the state of California is investigating whether or not it is a punishable offense under state law. In the end, HP has found at least one of its leakers and they will likely face very little reprecussion as a result of the techniques they used, other than the loss of Mr. Perkins.

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IBM (NYSE:IBM)