Vodafone Group plc (NYSE:VOD) is headed for turbulent waters with activist investors despite moving up over 40% off of its 52-week lows. ECS Assets is pushing the telecommunications company to unlock as much as $76 billion in a restructuring effort aimed at returning value to shareholders.

The activist hedge fund is the latest in a growing trend of investor activism aimed at unlocking value through the exploration of strategic alternatives. ECS argues that the company's inefficient structure has prevented the stock from trading at its intrinsic value. The battle is predominantly centered around Vodafone's 45% joint venture stake in Verizon Wireless, which is valued at around $50 billion.

ECS wants the Verizon Wireless stake to be spun off into its own publicly traded entity, which would become one of the ten largest stocks traded on the London Stock Exchange. If the process is successful, the hedge fund insists that the stock could rise nearly 50%. The idea may be an uphill battle for ECS, however, given the fact that the company has refused to sell the stake several times in the past. Regardless, this is definitely a stock worth watching!

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CSK Auto Corporation (NYSE:CAO) is a specialty retailer of automotive parts and accessories that has performed extremely well during the last year despite difficulties in the sector. The stock currently sits about 70% above its 52-week low and only cents away from making new highs. Some investors are convinced, however, that the stock is trading well below its intrinsic value...

Karsch Capital Management currently holds a 9.32% stake and is one of these investors. The activist hedge fund demanded this morning that the company's board of directors immediately conduct a review of strategic alternatives in which it would weigh the relative merits of selling the company versus giving a new management team time to turn around the company.

Karsch acknowledges that both options would be viable alternatives for the company. A sale of the company would be successful because (1) the company is highly attractive to other auto-parts retailers given its past success with mergers, strong potential synergies and unique real estate on the West Coast, and (2) the company is highly attractive to private equity firms because of the strong cash flows and recent strength of the auto M&A market. The hedge fund also noted that it had received several inquiries from private equity firms showing interest in the company and believes any sale would come at a substantial premium even to today's price.

Interestingly, Karsch is not only interested in a quick sale of the company. The hedge fund admitted that with the leadership and vision of an above-average CEO, they believe CSK Auto could execute an easily achievable operating margin of 9% in 2009 and retain its current 8x forward multiple on their EBITDA projections, which would result in a share price well above $30/share over the next 18 months. CSK Auto will also be able to eliminate a number of one-time expenses that hit the stock last year. And finally, the auto industry is one in which turnarounds have historically seen a higher rate of success.

These days hedge funds and private equity firms are pulling in billions of dollars each year, earnings enormous rates of return for their clients. These returns are not made by overpaying for companies; rather, many investors opt for a quick sale instead of a long-term turnaround that would yield far more value. Karsch has outlined both options today in its letter to the board. A sale of CSK Auto may still be the best options, but it would depend on the bids and various execution risk factors associated with a new management team.

In the end, CSK Auto is a great potential investment given the involvement of a hedge fund that understands how to unlock shareholder value. Unfortunately, the company's board of directors doesn't have the best track record after two accounting probes, a near bankruptcy and chronic underperformance relative to competition. Consequently, Karsch has demanded to be an active part of any turnaround process and threatened a proxy fight if they are cut out. Great news for investors.

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Though News Corp.´s (NYSE: NWS) Rupert Murdoch called his meeting with Bancroft family members, who through a dual-class share structure control Dow Jones & Co. (NYSE: DJ), ¨constructive,¨ critics of the deal within the company are looking harder for ways to keep editorial control of holdings such as the Wall Street Journal away from Murdoch.

The Independent Association of Publishers' Employees, which represents some 2,000 Dow Jones employees, has reached out to billionaires Warren Buffet, of Berkshire Hathaway fame, and Ron Burkle to get involved in buyout talks.

The Union President, Steven Yount, said "our union remains hopeful that the Bancroft family will conclude that a sale of Dow Jones is not necessary...but if the Bancroft family is to be persuaded that a sale must take place, we believe that there are alternatives to Mr. Murdoch."

Though Buffet nor Burkle have officially become involved in the discussions, the Union hopes that with their combined wealth and interest in the news has brought realistic contenders into the picture.

Retail brokerages are again finding themselves under intense pressure to consolidate. Yesterday, two hedge fund controlling 8.4% of TD Ameritrade (NDAQ:AMTD) urged the company to explore the possibility of a merger with E*Trade or Schwab, which jumped the price more than 6%.

The company revealed a regulatory filing that the two hedge funds had requested regulatory approval to acquire more shares. The hedge funds said they believe TD Ameritrade could drastically increase its long-term shareholder value through a business combination with E*Trade or Schwab.

Any transaction would give the company greater scale and potentially reduce expenses through the economies of scale effect; however, there are many barriers that stand in the way. The most notable is Toronto-Dominion Bank, which controls 40% of the company's shares and has already spoken out against any acquisition in favor of an oganic growth strategy. The company's CEO did note, however, that the company continues to evaluate its options. Combined, this is certainly a stock to watch!

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Anheuser-Busch (NYSE:BUD) shares moved up $0.70, or 1.32%, to $53.84 on speculation that the company could be a takeover target for Bill Ackman's Pershing Square hedge fund. The suggestion was first brought forth by the New York Post, which broke news from the fund's shareholder meeting.

The speculation stems from statements that Ackman made to shareholders when it raised $2 billion in additional equity. The activist investor told investors that the money would be used to purchase a controlling interest in an "iconic American company" worth between $30 and $40 billion. He also stated that the target company has three divisions. While Ackman declined to comment on these reports, Anheuser-Busch happens to fit this bill perfectly.

Many traders in this situation wait for an initial run-up and then utilize options strategies such as an options backspread to take advantage of the impending volatility. The logic is that once the stock has moved up on speculation, it will settle down if the rumor is false. Meanwhile, if the rumor is true then the stock will move much higher on a buyout.

Overall, this is nothing more than speculation; however, it is certainly a stock worth watching in the near future or a stock to trade for active day traders!

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Avaya Inc. (NYSE: AV) has accpeted a buyout offer of $8.2 billion from Silver Lake Partners and TPG Inc. The deal values Avaya at $17.50 a share, a 28% premium over the $13.67 a share the stock closed at before the buyout rumors began on May 29th.

Avaya is the world`s largest producer of corporate phone network equipment, and this all-cash leveraged buyout is the largest ever of a computer-network company.

Despite the rich price, Avaya is not without its problems. Increasingly, corporatations are moving away from tradition phone systems to internet-based systems. In 2006, Avaya reported only a 5% increase in sales to $5.15 billion, with $200 million in net income.

Avaya`s real appeal, especially compared to faster-growing corporate telephone rival Cisco Systems (NASDAQ: CSCO), is the vital patents it holds for Internet telephone technologies combined with being a cash cow - besides being debt free, Avaya generated more than $200 million in operating cash in the second quarter of this year.

Avaya, having had the premium mostly built into the stock price over the last week of speculation, is trading slightly higher at $17.07, up 2.09%.

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General Motors (NYSE:GM) shares rose marginally after a Wall Street Journal article dispelled any rumors that the automaker might go private in a booming automotive consolidation wave. CEO Wagoner resonded to the shareholder inquiring following the sale of DiamerChrysler to Cerberus Capital Management.

The move raises further questions, however, for the automaker that continues to struggle with soaring heathcare costs, lackluster sales and declining margins. GM also faces increasing competition from foreign companies like Toyota that continue to take marketshare. General Motors executives noted these problems and conveyed to shareholders that this summers' United Auto Workers Union negotiations should further their efforts.

Other things on the plate for GM include their efforts to take bankrupt autoparts maker Delphi back into the black; however, the two have yet to find suitable equity backers for their plans. Meanwhile, GM announced plans not long ago to introduct new Chevy Volt concept car, which runs on efficient battery power.

So, what does all of this mean for investors? Well, private equity's interest in the automaker sector sends a clear signal that some of Wall Street's best believe the sector is undervalued. Moreover, if GM is able to negotiate with its unions to lower costs (particlarly in healthcare) it could dramatially improve their bottom line. And combined with a successful new concept car, GM could be a great stock to own in the future...

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Palm Inc. (NDAQ:PALM) shares spiked $1.41, or 8.73%, to $17.50 in early trading today after the company announced that it would sell a 25% stake to a private equity partner that will bring former Apple Inc. (NDAQ:AAPL) executives onboard. Elevation Partners announced that it would purchase the stake in Palm for $325 million - a substantial premium to Palm's valuation - and bring in new leadership that may help Palm finally turn itself around.

The company began the process of exploring strategic alternatives earlier this year as many speculated that the company could become a buyout target for device makers interested in the company's technology. This new move, however, is welcome news for investors who jumped the stock price in support. Among the new executives being brought in is Jon Rubinstein - the company's co-founder and top product designer who helped pioneer the hit iPod.

Some investors remain skeptical, however, as to whether or not the company can compete with such a small market cap compared to others like Nokia. While the deal announced today does not specifically address that issue, the company does plan on introducing a number of new products and technologies to broaden their offerings. Meanwhile, the new talent will ideally help the company use these new offerings to take market share away from existing competitors.

Clearly, this private equity involvement is good news for all involved. Palm's plans to extend their product line and take on great new management personnel illustrate their commitment to improving shareholder value. This makes PALM a stock worth watching!

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LandAmerica Financial Group (NYSE:LFG) shares moved up last Friday and held their gains today after Viking Global disclosed a 7.9% stake in the company and expressed their belief that the company should be sold. LFG has been a solid performer during the past year, moving up over 70% since the end of 2006. The gains can be attributed to several new programs and initiatives designed to boost earnings during a tough market.

Viking Global said that while it is pleased with management's initiatives to improve the company, a large scale acquisition of the company could add $7 to $8 per share via synergies. This would double the company's earnings per share and create a substantial buyout premium. The activist hedge fund suggested that the probability of a deal would be high and that the board should carefully evaluate whether shareholder interests would best be served through a buyout or by remaining independent. Either way, this is definitely a stock to keep on the radar.

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After a quick double in price last week Cypress Biosciences (NDAQ:CYPB) is again in the news after Black Horse Capital Advisors disclosed a 1.2 million share stake and said it opposed the company's plan to sell 4.7 million shares of stock in a public offering and urged the company to consider adopting a share buyback plan instead.

The activist hedge fund said it was pleased with the company's very successful Phase III results Milnacipran in Fibromyalgia Syndrome and suggested that the drug should provide the company with substantial revenues in the future. However, the company now has too much cash - specifically, $100 million in cash with no debt and a low cash burn rate. Combine this with a successful late stage drug and it is difficult to see why the company would need to issue more shares to raise money!

What does this mean for investors? Well, a large scale share buyback combined with the avoidance of issuing any new shares would likely increase the company's share price and reward investors with cash that is simply being unused right now. And Black Horse also hinted that if these demands are not followed they may consider other options available to them as large shareholders - presumably a proxy fight. Combined, these factors make CYPB a stock worth watching!

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