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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We covered Advancis Pharmaceuticals Corporation (NDAQ:AVNC) in an article back on August 18th. We noted that the company had successfully successfully achieved its Phase III PULSYS trials, which demonstrated that it's drug distribution technique was effective. Moreover, we noted a 13G filing (a more passive version of the 13D) which indicated a 17% ownership stake by Deerfield Capital Management - a fund that invests in "special opportunities".

New developments at Advancis make the situation more promising. On September 13th, the company announced that "it has received correspondence from the U.S. Food and Drug Administration (FDA), confirming that the Company's recent successful Phase III clinical trial, along with other data, would be considered adequate for filing a New Drug Application (NDA) via the 505(b)(2) regulatory pathway." The company anticipates filing the Amoxicillin PULSYS NDA in December 2006 or January 2007.

The stock is currently trading around $5.13 per share, up over 20% since our first mention of the company.

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National Atlantic Holdings Corporation (NDAQ:NAHC) revealed on Friday that 8.2% holder, The Commerce Group, Inc. (NYSE:CGI), may be interseted in more than just an investment. According to the 13D filing:

"The purpose of this statement is to report that Commerce is in the process of evaluating a potential transaction with the Issuer, including the possibility of entering into a business combination or other strategic transaction with the Issuer such as an acquisition.

Whether Commerce decides to pursue any action as described above will depend on its continuing assessment of pertinent factors, including without limitation the following:  the results of its due diligence review of the Issuer; the Issuer's and Commerce's business and prospects; the outcome of discussions and negotiations between Commerce and the Issuer concerning the terms and conditions on which any potential transaction described above would take place, including, without limitation, the purchase price for the Issuer's common stock; other business and investment opportunities available to Commerce; general economic conditions; stock market and money market conditions; the attitude and actions of the management and Board of Directors of Commerce or the Issuer; the availability and nature of opportunities to dispose of Commerce's interest; and other plans and requirements of Commerce."

The stock is up over 5% today on the news to $11 - a continuing recovery from its $8.50 lows in late June. The stock has a forward P/E of just over 7 along with over $2.90 per share in cash with no debt - making it a decent acquisition target. However, it is worth noting that the current enterprise value of the stock sits at only $7.29 per share, which reduces the likelihood of any large premium over the current price in the event of a merger or buyout. Despite this, the stock is definitely worth watching as this story unfolds.

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