American Home Mortgage Investment Corporation (NYSE:AHM) shares fell $9.32, or 89.02%, to $1.15 after its shares resumed trading after a day and a half of being halted. The company announced that it was facing serious liquidity issues amid a flood of margin calls from lenders and has hired advisors to evaluate its options, which could include a liquidation of its assets.

The mortgage lender confirmed that it had already received and paid "very significant" margin calls during the past three weeks and has "substantial" unpaid margin calls pending. To compound the problems, AHM also said it was unable to borrow on its credit facilities at present and is unable to fund its lending obligations. Investors pushed the stock down today on concerns that the company will be unable to meet its obligations and be forced to liquidate. In fact, the company revealed just today that it has hired Milestone Advisors and Lazard to help it in evaluating its strategic options and to obtain additional funds.

The news comes after widespread troubles in the mortgage sector lasting upwards of six months. Subprime lenders that lend to people with poor credit were the first to suffer a rise in delinquencies and defaults with more than a dozen brokers declaring bankruptcy. Many are hoping that this three year problem will be resolved eventually as lending requirements are tightened and subprime lenders undergo some consolidation and recapitalization.

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Stamps.com Inc. (NDAQ:STMP) shares hit a two year low recently prompting at least one investor to speak out against the company. LaGrange Capital disclosed a 6 percent stake in the company and demanded that the company immediately institute a share buyback program and work on improving its financial condition or put the company in the hands of someone who can!

La Grange said that it feels Stamps.com offers a highly competitive product and below market prices while maintaining key barriers to entry. The company also has a subscriber-based model capable of generating substantial recurring cash flows. In fact, management has stated that the lifetime value of each customer is 2x the subscriber acquisition cost - a great ROI for any industry! However, the hedge fund is disappointed with the disconnect between potential and actual performance.

Stamps.com needs to revive its earnings and subscriber growth rates in order to regain the confidence of shareholders. Backing out interest income and fully taxing earnings, the company generated a mere $0.07 in non-GAAP EPS - a decline from last year. Moreover, the new direct marketing campaign generated only 2,000 net paying subscriber adds with the total number of subscribers below the prior year's quarter and only marginally higher than the last quarter.

One of the key suggestions made by LaGrange was a share buyback program that would repurchase 1/3 of the company's outstanding shares. The hedge fund insists that such a program would involve minimal financial risk given the fact that the company has no debt and a substantial pile of cash. LaGrange also recommended that the company pursue strategic partnerships and alliances to drive subscriber growth, which is key to profitability. If the company isn't capable of delivering on results, it should consider a sale of the company to a more capable group.

In the end, Stamps.com is an extremely undervalued business with poor management that is unable to deliver results. And with the company trading at a two year low, many shareholders are ready for change. Obviously, any share buyback or sale of the company should dramatically help unlock shareholder value, which makes STMP a stock worth watching!

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Cache Inc. (NDAQ:CACH) shares rose $1.94, or 12.62%, to $17.31 today after the company announced a 6 percent rise in same-store sales along with a one million share buyback. The news comes just one day after Vardon Capital Management noted that the company was trading at 2/3 its private market value with $4 per share in cash and therefore should implement a share buyback program. Shareholders are extremely satisfied with the jump in same-store sales and clearly applauded the buyback announcement.

Cache is a specialty retailer of social occasion sportswear and dresses targeting style-conscious women. This month, the company acquired Adrienne Victoria Designs in a move that many applauded. There is some speculation that it was this acquisition that has provided the boost to sales and may help boost the company's operating margins and net profit going forward.

Meanwhile, Vardon Capital, which owns 9.1 percent of the company, said that the share buyback should help close the gap between the current market pries and its intrinsic value. The move will also help boost the company's earnings per share and ROA/ROE ratios. Finally, the company's mid-single digit operating margin has the potential to reach double digit levels through such initiatives as well.

So, why are shares up today? Well, the company's acquisition of Adrienne Victoria turned out to be a great decision while the company's share buyback announcement helps ensure that the company has confidence in itself going forward and is dedicated to closing the discount gap in its valuation. Combined, these factors make CACH a stock worth watching!

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Packeteer Inc. (NDAQ:PKTR) shares moved up marginally today after Chapman Capital disclosed a 9.9 percent stake in the company and demanded that the company immediately hire an investment bank to maximize shareholder value. The wireless application provider has been facing widespread criticism since posting a wide loss during the second quarter of this year. Shareholders are hoping that Chapman can help unlock value through a sale of the company.

Activist investor Robert Chapman is well known for actively seeking to turn around or force the sale of the companies in which he is involved. He is also known for not being especially patient - and Packeteer's board may have pushed the envelope. In his letter to the company, Chapman noted that both the CEO and CFO failed to return his calls or respond to his inquiries and demanded that both be immediately fired. After all, Chapman is one of the largest owners of the company with a 9.9% stake!

Any investment bank will likely recommend one of several actions. The most anticipated action is a sale of the company to a strategic or financial buyer. Another possibility would be a leveraged recapitalization of the company that would enable shareholders to seek immediate returns in the form of one-time dividends or share buybacks. Either way, these actions would result in a windfall for shareholders. And given Chapman's reputation and large stake in this company, we think there is a decent chance that the company will eventually take action and hire and investment banker to explore its options. This makes PKTR a stock worth watching!

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Activist investor Robert Chapman is betting big on Nabi Biopharmaceuticals (NDAQ:NABI) while pressuring the company to implement a three step plan aimed at maximizing shareholder value. Chapman's hedge fund revealed a 9.4 percent stake in the company with several large purchases made throughout the month of July. Investors are carefully watching this situation as any successful initiative to maximize shareholder value could pay some large dividends!

Chapman's proposed plan would involve three steps: (1) Pursuing an FDA approval of Nabi's BLA for Nabi-HB Intravenous, (2) distributing the proceeds from a sale of Nabi Biologistics to shareholders, and (3) partnering/licensing Nabi's vaccine pipeline. Recently, the company announced that it the second of two planned strategic business units while eliminating 5 percent of its workforce (resulting in a $3.3 million annual savings). Widespread shareholder support and pressure ensure that the restructuring will continue on schedule.

"These and other actions recently taken by the company are designed to facilitate our strategic alternatives and partnership process that maximize the value of Nabi and our pipeline," said CEO Leslie Hudson.

Robert Chapman was also satisfied, commenting, "Unlike many of our activist targets, Nabi is not yet worthy of our disdain or disgust. The company has taken the necessary steps to prepare for its restructuring and recapitalization. Nabi has bifurcated itself into two strategic business units that facilitate the successful completion of its strategic alternatives process being overseen by Bank of America Securities, and has committed to reduce further its cost structure and cash burn. These developments give Chapman Capital confidence that Nabi CEO Leslie Hudson is a man of his word, with that word being "execution" and not the formerly insuperable one of "vision" (talk)."

In the end, shareholders will have to wait to see whether or not this turnaround is successful. However, given the involvement of such large and successful activist investors along with support of the company itself, NABI is certainly a stock to watch during the next few months!

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Ampex Corporation (NDAQ:AMPX) rejected a partial buyout offer from its largest shareholder late last week. The move comes after the company expressed interest in utilizing a special purpose acquisition company (SPAC) to better utilize its intellectual property. Shareholder are obviously looking for this proposal to materialize as it would mean a decent buyout premium.

ValueVest, who owns a 13 percent stake in the company, proposed the creation of a new company that would purchase all existing intellectual property rights, including the franchise, non-competing product manufacturing, and private-label rights to use the name Athena and all of the company's patents, copyrights, trade secrets and other intangible assets.

The new company would also enter into an agreement that would effectively transfer all management and economic rights of all existing licenses of the intellectual property to which no payments are currently being made. ValueVest agreed to provide $14 million in cash to fund the new company, with $7 million being used to acquire intellectual property. In return, the hedge fund required the right to 50 percent of the new company's net income.

While ValueVest's original proposal was rejected, they did leave the door open for suggestions to the company. Meanwhile, the company said it has to hear back about MCAM's valuation of its intellectual property in order to get an idea of just how much everything is worth. In the end, we could still see a deal materialize but it may take a little longer than expected. However, AMPX is still a stock worth watching!

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Many hedge funds are experiencing problems in today's environment with over-leveraged capital and overly zealous managers. Sowood Capital Management became yet another example today after a stunning 50% loss in one month led to it's announcement that it would begin winding down its firm. The Boston hedge fund is one of the largest to fall as its assets were cut in half from $3 billion to $1.5 billion in record time.

Sowood said in a letter to its investors that it "made a painful and difficult decision" to sell nearly all of the fund's portfolio to Citadel following "severe declines in the value of [their] credit positions and non-performance of offsetting hedges". That statement caused some to recall the LTCM fiasco that led to a similar downfall of one of the largest hedge funds at the time. And why? Because they were over-leveraged and over-exposed to certain markets.

Meanwhile, the deal could be sweet for Citadel who is known for making purchases in downward markets at bargain prices. Last year, the hedge fund assumed a number of energy positions held be Amaranth after that hedge fund experienced substantial losses - eventually they profited on the deal. Whether or not this particular deal turns out to be a good buy, however, remains to be seen. Regardless, this is definitely a situation to keep a close eye on in the near future!

Subprime concerns continued to weigh on the market today after Citigroup analysts estimated that Fannie Mae and Freddie Mac would suffer a loss of $4.7 billion loss in value as a result of declining subprime mortgage valuations. Soon after, a Freddie Mac spokeswoman countered, saying the analysts were "mistaken" and that the groups haven't seen "any material markdown of value". Clearly there are some major reasons for concern here, but investors remain uncertain as to whether or not the groups will be able to ride out the storm.

The Citigroup report indicated that Fannie Mae's subprime holdings have dropped $1.5 billion - or 2.5% of the company's value. Meanwhile, Freddie's holdings dropped $3.2 billion - or 8% of the company's value. However, since these are bonds that are not going to be forced into liquidation, the actual impact on the company's values are lessened. And in the end, these billions hardly make a huge dent on the $1.4 trillion in loans that they have outstanding.

The two government companies, which buy and package home loans, have thus far avoided substantial damages from subprime loan defaults. The two companies have a combined $182 billion in backed subprime loans, however, the vast majority of these loans remain AAA rated. While Freddie and Fannie do not guarantee these loans, the companies will certainly be damaged if defaults continue as they have in recent weeks.

In the end, this is definitely a situation that is worth watching. These two companies carry a lot of weight in the mortgage market as they are backed by the government. The subprime problem is far from over and may take until 2009 to resolve according to some industry executives. In the meantime, it is important to keep an eye on default rates in order to make sure the problem doesn't spread significantly and cause further selloffs in other sectors.

Kraft Foods (NYSE:KFT) is now home to yet another famous investor as Warren Buffet joins the ranks of famed activist investors Carl Icahn and Nelson Peltz who have already built up sizable stakes in the company. Shareholders are hoping that the involvement of all these famed investors will result in extraordinary gains.

It is unclear whether Buffet, who owns less than 5 percent of the company, will side with the two activists in their plans for the company. Icahn and Peltz proposed a divesture of key brands in an effort to provide quicker returns for shareholders. There is speculation that they could face some problems with Buffet, however, given his track record of investing in companies undergoing a restructuring brands internally - he might be siding with management.

Many others insist that Buffet may simply be interested in the prospects of the spin-off combined with a strong brand. Historically, spin-offs have tended to outperform the larger market in their first few years as an independent company, especially when the company possessed a leading brand. Clearly, Kraft is a great fit for this type of strategy and so far the company's shares are up over 11% since the spin-off was completed last March.

In the end, this is definitely a unique situation given the involvement of so many famous investors that may even be on opposing ends of the spectrum when it comes to plans for the company's brands generating poor operating results. Combined, these factors make KFT a stock that is definitely worth watching!

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Washington Group International's (NYSE:WNG) merger plans have been drawing some criticism from shareholders. Today one the company's largest shareholders, David Einhorn, said in a regulatory filing today that he would vote against the plans. The 10 percent shareholder believes that the proposed $2.3 billion transaction is a bad deal for shareholders and insists that few other large shareholders support the idea.

David Einhorn's lengthy letter to the board of directors opposed not only the undervalued bid but also the sale process itself. During the sale process, the company relied on the fairness opinion of Goldman Sachs instead of conducting an auction process despite the fact that the company received several unsolicited bids earlier. More, based on the proxy statements, it is clear that the board relied on an overly conservative forecast the failed to properly value the company's future growth prospects. Various contracts and income opportunities that were not fully appreciated could add substantial value to a buyout price that Einhorn estimates as high as $117 per share!

David Einhorn also argued that the company may be better off as a standalone enterprise. Washington Group is over-capitalized at the moment and URS, the acquirer, plans to take advantage of the fact to get a relatively cheap transaction. Einhorn argues that this cash could be returned to shareholders in the form of a special dividend or share buyback if the company decided against the proposed transaction. If the company were recapitalized at the same proportions as the buyout, shareholders could obtain $27.50 per share in cash and keep the company instead of selling out for $43.80!

In the end, the proposed transaction is clearly bad news for shareholders. Given that a 10 percent shareholder now publicly opposed the merger while insisting that others feel the same way, there is a possibility that the merger could be rejected. If this happens, we could see higher bids in an auction process or significant actions taken to unlock shareholder value through a recapitalization. Either way, this is great news for investors and definitely makes WNG a stock worth watching!

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