Lancaster Colony (NDAQ:LANC) faced criticism on Friday over its governance policies from a group of investors led by Barington Capital. The investors asked the consumer products maker to substantive changes to its governance policies as well as remove several takeover defenses that violate shareholder rights. Changes to these policies could enable shareholders like Barington to push for changes aimed at unlocking shareholder value.

In a letter to the board of directors on Friday, Barington Capital criticized Chairman and CEO John Gerlach and the company's founding family for consolidating their control of the company, saying, "We believe that the numerous defenses the company has in place are excessive and demonstrate disregard for the interest of Lancaster's public shareholders by facilitating the entrenchment of the company's directors and executive officers and minimizing the influence that shareholders have on the board."

Removal of these provisions could pave the way for shareholders like Barington Capital to unlock value. What might these actions include? Well, Lancaster said in April 2006 that it was exploring strategic alternatives, including a possible sale of its glassware and candles businesses. Meanwhile, Barington also pressured the company to take on $300 million in debt to finance and self-tender offer or similar transaction to create value for shareholders. If either of these transactions materialized, it could mean significant returns for shareholders. Combined, these factors make LANC a stock worth watching!

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Lehman Brothers (NYSE:LEH) has been a strong performer this year, moving up over 28 percent off of its lows, but the company is still struggling to join the likes of Morgan Stanley and Goldman Sachs as an elite investment bank. While most investors still think of Lehman Brothers as a bond house with potentially damaging exposure to mortgages, some are now beginning to see the firm in a new light.

What makes Lehman Brothers an attractive stock? Well, the firm's efforts to restructure itself have produced tangible results while its stock price has moved up relatively little. Specifically, the firm has made great progress in its move to diversify from fixed income into stocks and bonds both in the U.S. and broad. And the stock remains extremely undervalued - in fact, LEH trades at one of the lowest price-to-earnings multiples of any brokerage. And management knows the firm is undervalued. Mr. Fuld said, "Whether the world catches on today or tomorrow, I've got plenty of time for that. I like that we're not fully appreciated."

Lehman Brothers also has far less risk than other brokers who have used cheap credit to force otherwise unprofitable deals through their pipeline. While the firm is working on restructuring their balance sheet to take on more trading and deal risk, they still intend on making much safer bets than the competition. The firm also makes more money overseas than every other investment bank besides Goldman Sachs. These factors make LEH a safe bet in the event of a downturn in the economy that would materially hurt other firms' earnings.

In the end, Lehman Brothers is a company that is working to convert itself from a fixed-income firm to an elite investment bank like Goldman Sachs or Morgan Stanley. If it is successful, it could mean significant share appreciation from these levels. And the reduced amount of risk they are taking on makes them a safer bet than other investment banks in the event of a downturn in the economy. This makes LEH a stock worth watching!

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Kraft Foods (NYSE:KFT) shares moved up yesterday on news that billionaire investor Nelson Peltz took a 3 percent stake in the company. Shareholders and analysts had long been speculating that an activist investor could get involved with the company and force it to institute a massive share buyback, revive its first tier brands and sell or spin-off its second tier brands.

Nelson Peltz is well known for his past work with companies like Wendy's, whose shareholders experienced a more than 50% rise in value since his first involvement. Most of his larger prior deals have been in the restaurant and food business as well, adding to the probability that his Kraft involvement isn't simply putting money away for the kids!

So, what are his plans? Well, many analysts and investors expect the activist investor to first leverage up since it has debt amounting to less than two times EBITDA. Secondly, Peltz will likely demand that the company sell off its second tier brands in order to focus on reviving its best in class. These brands could include Post cereals and Maxwell House. And finally, he will likely boost spending in frozen foods and cheese in order to strengthen the company's two best product lines.

Combined, this is all good news for investors - but the timing couldn't have been worse for Peltz. The activist investor was not required to disclose his stake until it reached more than 5 percent of the company - this leak reportedly angered him. Now that investors know what he's likely up to, it may become much more expensive for him to purchase shares. Regardless, this is definitely a stock worth watching!

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