Steel Partners II LP is one of the most well-known activist hedge funds in the market today ran by 40-year-old Warren G. Lichtenstein, founder and principal of the billion dollar hedge fund. Through the years, the fund has built a track record of success through hostile takeovers and proxy battles. Like most activist funds, Steel Partners is simply attempting to give shareholders the money and rights that they deserve by replacing inefficient management and streamlining processes/spending.

In rare talk with Business Week last year, Mr. Lichtenstein offered some insight into his funds purpose and goals. He first noted that he thinks of Steel Partners more as a partnership that hedges itself by "buying cheap" than a stereotypical hedge fund. That is, instead of dealing in trading securities, he prefers to deal in terms of the companies they represent. Steel Partners has typically focused on finding undervalued companies (typically due to bad management) and unlocking that value. This usually involves replacing the Board, firing the responsible persons, and then unlocking the company's potential. Mr. Lichtenstein also told Business Week that he offered something management couldn't: Discipline. He said that his fund is focused on empowering people and held them accountable for their actions - something that corporate management these days struggles with. Finally, he revealed that his future plans are to focus his energy on larger companies with billion dollar market caps, because he finds them less risky despite being "riddled with inefficiencies and excessive costs".

Click Here to Track Steel Partners' Investments
(Sign-up for e-mail alerts to get an e-mail every time Steel Partners makes a trade, or is involved in a deal!)

Click Here to View More Hedge Fund Profiles

We first featured IMAX Corporation (NDAQ:IMAX) here back on August 11th when the stock was halved after a string of bad news. Since then, the stock had dropped another dollar or so before settling down in the upper $4 range. However, interest was renewed in today's trading as CNBC's Thomas Ko revealed that he added the stock to his portfolio, citing a potential buyout. Ko made the argument that the stock was at $10 when they were unable to find a buyer in the Board's range (most likely around $15), now it is much more attractive. Currently, the stock is trading in the $5 range - a 50%+ discount from its high a month earlier. Ko believes that many companies, potentially including Walt Disney Co. (NYSE:DIS) and Sony Corp. (NYSE:SNE), might be interested in the company in the $7 area. At this point, a buyout between $7 and $9 would be difficult for the Board to turn down, given the recent SEC investigations and other issues plaguing the company. Moreover, if the Board expressed interest in a sale before this entire ordeal happened, it is perhaps more likely that they would consider any opportunities in their situation now.

This speculation caused the stock price to surge 10% to settle at $5.27 on the day. It is likely that day traders will now be involved in the stock, and may cause significant near-term volatility. Also remember, a buyout is still nothing more than a rumor. However, the company remains cheap at its current levels and we know the Board was (and perhaps still is) interested in a sale of the company. These factors justify at least keeping an eye on the company throughout the next few months as things get clearer.

Related Companies
Sony Corp. (SNE)
Walt Disney Co. (DIS)

Weatherford International Ltd. (NYSE:WFT) revealed today in a Form 4 filing with the SEC that director Robert Moses purchased 53,544 shares on Monday at prices ranging from $39.88 - $39.99. This $2 million purchase follows a rush of other smaller puchases by company officers and directors on September 1st. Weatherford provides equipment and services used for the drilling, completion, and production of oil and natural gas wells in the U.S. Some are speculating that this move relates to the company's earlier announcement of a successful installation of their "Life of Well" system. In that announcement, the company gave an overview of the system:

"Weatherford's Life of Well(TM) optical in-well system is providing both continuous seismic and pressure/temperature monitoring data and is also interfaced to the existing permanent ocean bottom cable system. This allows for the simultaneous collection of permanent seabed and downhole seismic data representing a significant milestone for the industry."

Although a report issued yesterday argued that value investors should wait to invest in oil services companies, investors applauded the insider buying as the price rose 5.45% in mid-day trading today.

Related Companies
Precision Drilling Trust USA (PDS)
Smith International (SII)
Halliburton Company (HAL)

Bloomberg reported this morning that RCN Corp (NDAQ:RCNI) may be considering a possible sale of the company, after it retained Blackstone Group LP as an advisor to the company. The company - which only recently emerged from bankruptcy - moved up 7% on the news. But is there any substance to this deal? If so, how much would the deal be worth?

When many people consider buyout situations, the first thing they look at is the Enterprise Value (EV), which takes into account the company's market cap, debt, minority interest, preferred shares, and cash. This tends to give a more accurate estimate as to the worth of a company because it takes into account both debt and cash - which would have to be acquired with the company. RCN has an EV of $1.07 billion or approximately $28.80 per share, a premium to even today's price. The company also sold some of its assets in the past (seen in this 8K), where its customers were valued at $2,500 each. Using this valuation, we can estimate that their customer base alone (418,000 as of April) is worth about $1.04 billion. Considering the company only has around $205 million in debt, $98 million in cash, plus the potential for a premium, makes the company look attractive as an asset buyout play.

Whether or not the deal will go through depends on a number of factors; however, it is definitely a strong possibility. Any actions taken by the Board to steer the company in this direction can be found in future SEC filings - most likely 8K filings. This stock is definitely a good one to keep an eye on as these events continue to unfold!

Related Companies
Bell South Corporation (BLS)
Verizon Communications (VZ)
AT&T, Inc. (T)

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.  

Related Companies
Tyson Foods, Inc. (TSN)
Overhill Farms, Inc. (OFI)
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...

Related Companies
Reinsurance Group of America (RGA)
PartnerRe Limited (PRE)
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.

Related Companies
Medtronics, Inc. (MDT)
Biomet, Inc. (BMET)
Steris Corporation (STE)