Wendy’s International (NYSE: WEN) shares are well off of their 52-week highs of around $42.22 but the company is moving forward with its turnaround plan while an activist investor is still pushing for a sale. Management is now facing a race against the clock to prove that it can remain a viable investment on its own before billionaire activist investor Nelson Peltz makes his second run at the board in an attempt to take over and sell the company. Luckily, shareholders benefit from either situation and it has never been a better time to own Wendy’s!

Wendy’s announced new plans today to roll out inexpensive sandwich wraps and a new hamburger to jump start sales as the U.S. economy weakens. The fast food chain acknowledged that the consumer environment has changed drastically from a year ago and is now focusing on growing the top line through unique new offerings. The chief executive is focused on ending five years of declining traffic with its most aggressive new product line-up since the mid-1990’s. Meanwhile, the company is also continuing to improve its bottom line by focusing on raising margins by restructuring and controlling costs. Some of these efforts have been seen in recent earnings, but the company still has a long way to go towards any meaningful turnaround.

Wendy’s has also been weighing a sale since June 2007 under pressure from billionaire activist investor Nelson Peltz, who owns nearly 10% of the company and is now seeking control after failing to successfully purchase it. Peltz announced his plans to overhaul the company’s board of directors on February 11th when he nominated his own slate of directors in a regulatory filing with the SEC. The legendary activist proposed expanding the board to 15 members and nominating six in a move that would give him effective control over the company as he already control three seats since 2006. Given his prior pushes towards a sale, once can assume that his motives have not changed and that he will push to sell the company at an attractive price.

In the end, this is all good news for shareholders who have nothing to lose and everything to gain is Nelson Peltz successfully takes over the company while the company itself is already working on a turnaround in case the move falls through. Wendy’s is a stock in transition and it will be interesting to see what happens to it over the next few months as the next annual meeting approaches. Combined, these factors make WEN a stock worth watching!

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3Com Corporation (NASDAQ: COMS) is down 20% in midday trading due to the seemingly collapse of its acquisition by Bain Capital LLC. The deal fell apart because a little-known wing of the Treasury Department known as the CFIUS appeared likely to block the acquisition.

3Com is a billion dollar company that has seen better days but still has a valuable business providing secure network solutions, which is exactly why the CFIUS didn't like the proposed $2.2 billion deal. Bain Capital LLC partnered with the Chinese company Huawei Technologies to purchase 3Com, and though Bain would have had the lions share of the equity, over 80%, Huawei's stake concerned the Committee on Foreign Investment in the U.S. or CFIUS.

Huawei, the largest network company in China with strong ties to the country's Communist government, has been accused in the past of selling communications equipment illegally to rogue states such as Saddam Hussein's Iraq. In addition, the company raises concerns even superficially as it is run by a former Chinese Army Officer.

3Com provides some network security solutions to the U.S. Defense Department, and with Chinese hackers seen as a major threat to U.S. infrastructure this acquisition was a hot political issue. In fact, the senior Republican member of the House Foreign Affairs Committee even sponsored a bill to specifically prevent 3Com's sale.

Under such scrutiny, Bain decided to drop its request for approval of the deal by the CFIUS, effectively meaning the deal is dead in its current form. The problematic Defense Department business is actually done only by a small wing of 3Com known as TippingPoint, and there is a possibility the deal could be renegotiated to exclude that unit.

3Com's CEO Edgar Masri said "We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction,'' but that 3Com and Bain "remain committed to continuing discussions.''

It is possible that a deal could still be done given that TippingPoint accounts for only 8% of 3Com's revenue, but in a slow economy with 3Com trading some 40% below the proposed acquisition price, Bain might be just as happy to let the deal die for the time being.

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Crocs, Inc. (NDAQ: CROX) shares fell sharply today after the company announced an 84 percent jump in profits on revenues that nearly doubled on international demand, but reaffirmed a 2008 outlook below Wall Street expectations. Momentum stocks like these trade largely on expectations in addition to physical numbers. Unfortunately, there were problems with both today as the stock sank more than 10 percent mid-day as shareholders consider whether or not the company will be able to keep up its stellar track record of success. So, is Crocs a stock worth a look now or is there more downside?

The first thing to consider is valuation. The valuation of a high-growth company is often set by its expected growth in addition to its actual performance. This is why high-growth companies like Crocs can drop when reporting spectacular results - it depends largely on expected growth rather than actual performance. The reaffirmed 2008 guidance in this case was not what many investors were expecting. This is clearly visible if we take a look at the company’s historic PEG ratio, which shows in plain view that investors were expecting much faster growth. Meanwhile, if we take a look back at the company’s earnings announcements, we see that its earnings surprises are slowly declining and now risk being flat or negative with a reaffirmed guidance.

Crocs’ earnings call also gave some valuable insights into why the firm’s shares dropped so dramatically. Analysts were most concerned about a 27.2 percent rise in inventory build-up during the third quarter. The company ended the fourth quarter with $248.4 million - up $195.3 million from the end of the third quarter. Management defended the build-up by arguing that they have chased demand since inception and felt that the planned build-up was necessary to meet first half forecasted customer demand. However, the carry cost of excess inventory - that is, warehousing and distribution costs - can be steep and may end up costing the company big money if they are wrong during future earnings announcements.

All of that being said, Crocs currently trades at just 10x forward earnings, which is far below that of its peers. The company also has a strong product line and expects to see continued growth through 2008 despite a decline in the U.S. economy through strong international growth that is already showing up in today’s announcement. In the end, Crocs carries a lot of risk with its slowing earnings and large inventory, but the stock is trading at historically cheap levels. In the end, it is clear that growth is slowing but the concern is that management may not realize it and be overbuilding inventory…

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The Brink’s Company (NYSE: BCO) directors may face some competition during this upcoming proxy after MMI Investments unveiled its own slate of board candidates in a PRE14A filing with the SEC. The activist hedge fund charges that the security company’s valuation has chronically lagged its peers while management has failed to address the issues of strategic configuration that have caused this under-performance. MMI contends that its nominees are highly qualified and committed to selecting and executing the strategy that will maximize shareholder value. So, is Brink’s worth a second look now?

MMI Investments currently owns approximately 8.4 percent of Brink’s with other activist shareholder holding additional substantial stakes, which increases the chances of success in this particular scenario. The activist hedge fund believes, as many others have in the past, that has a best-of-breed portfolio of assets but is chronically undervalued thanks to a “conglomerate discount”. Activist hedge funds have long recommended that the company spin-off its various divisions in order to unlock value for shareholders.

MMI’s proposed slate of directors are totally committed to the creation of shareholder value and have the necessary experience and skillsets to execute on that commitment, both operationally and strategically. They offer substantial expertise in the security industry and have the strategic vision to value creation. Translated: Not only will they push for a spin-off, but they will also effectively oversee the various resulting companies and/or obtain the most favorable pricing in the event of a sale of any divisions. Combined, these factors make Brink's a stock worth watching with the upcoming board of directors!

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Yahoo Inc. (NDAQ: YHOO) elaborated on their discussions with various parties regarding a possible merger in its Form 425 filed with the SEC today. The Q&A for shareholders elaborates on the News Corp (NYSE: NWS) bid for the company as well as several other valid questions that have been raised during the past few weeks as the company looks towards a possible acquisition. It provides valuable insight for shareholders and arbitreurs looking at a possible deal.

Here’s a complete transcript of the Q&A direct from the filing:

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Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) shares moved sharply lower after the two telecom providers announced new flat-rate plans. The move marks a shift from high margin services to lower margin staples that could put pressure on margins and may spark further reduction in prices aimed at increasing users. The commoditization of the wireless voice service industry is a move that many investors expected but dreaded as it could end up curbing growth rates and reducing valuations for many telecom providers. So, what does all of this mean for shareholders of VZ and T?

Currently, both plans are priced at $99 per month, which means that it will only affect so-called power-users that would like their services consolidated into one predictable price. Moreover, the moves are also designed to increase customer loyalty by locking them down for longer contracts. The two companies are hoping to attract a number of new users from other service providers that offer more expensive services. Indeed, this could help boost revenues over the short-term as an increased number of users sign up but may put pressure on margins as the average revenue per user would likely decline while expenses would remain consistent or higher (in the event of a new marketing spend).

The downside is that this is a familiar path for the telecom providers that initially had contracts for their original services before being forced to take them down thanks to increased competition. The unlimited services are expected to meet the same fate eventually as prices continue to be lowered and contracts eliminated. Once these wireless services have switched to more of a staples service, they will likely meet the fate of phone companies now that operate on razor-thin margins and are forced to come up with new features in order to compete.

Investors may be better off looking at handset makers if they wish to benefit from this industry. Unlike services, handsets must be replaced every few years while rapid growth in emerging markets is maintaining and accelerating growth in many companies. Additionally, companies like Motorola are being targeted by activist investors bent on unlocking value for shareholders and converting them to more pure-plays in order to benefit directly. In the end, the industry as a whole is commoditizing and that means slower growth, smaller margins, and increased competition… it may be time for some investors to move on…

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Herzfeld Caribbean Basin Fund, Inc. (NDAQ: CUBA) shares are up sharply today on news that Fidel Castro has stepped down from Cuba’s top post. The fund is a non-diversified closed-end management investment company with a focus on investing in issuers located in Caribbean Basin countries, including Cuba. Obviously, any normalization of U.S.-Cuba relations would be a massive boost to the troubled Cuban economy which could be flowing in U.S. vacation dollars. In the past, the normalization of these relations seemed like nothing but a distant dream, but many are now speculating that this change in power could put a timeframe on the event. So, is Herzfeld worth watching?

The first thing to remember is that Fidel Castro’s step down from power does not necessarily mean that U.S. relations are imminent. After all, Fidel’s own brother Raul is the one that will be in power and there is no guarantee that he will do anything to mend relations with the country’s powerful neighbor. The good news is that many believe that the younger Castro brother will consolidate power and free him up to pursue soem kind of slow overhauls aimed at opening up the country’s closed economy and perhaps even its closed society. Indeed, Wall Street expectations proved to be very high today of an economic overhaul in the country at some point over the next few years.

There is also talk among U.S. politicians that changes be implemented back at home to encourage foreign travel and trade with the communist country. “We have had a bad policy for nearly 50 years for bad reasons that have nothing to do with Cuba,” said Democratic Representative Charles Rangel. Similar sentiment is shared by others who support lifting the travel ban on the country along with the trade embargo at some point in the future. After all, the U.S. trades freely with other communist countries like China with little regard for politics - why should Cuba be any different?

The second thing to remember is that this stock is extremely volatile as the company recently had a float of just 1.7 million shares and a market cap of $12.5 million before a rights offering doubled the number of shares. Additionally, the thin daily trading volume can also make swings much larger than they should be. Unfortunately, there aren’t many better options out there that are better exposed to Cuba in particular, which means that investors may have to stick with this stock for the time being. However, it may be wise to hold off on investing in this particular fund until shares return to normal levels.

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ECtel Ltd. (NDAQ: ECTX) is a small telecommunications firm that is starting to generate some big waves as the leading provider of revenue assurance solutions. The company’s flagship fraud management and revenue assurance products, collectively known as FraudView, leads the market and helps telecom operators reduce their financial risk while driving increased customer satisfaction and revenues. Recently, ECtel expanded its offerings to include its Integrated Revenue Management (IRM) platform, which features credit and risk monitoring, quality of services business impact analysis, roaming assurance, and business intelligence tools for enhancing profitability and scoring. Together, these solutions can help telecom operators improve their profitability and customer service.

ECtel shares moved up over 6 percent today after the company announced that its new offerings were paying off. The telecommunications company reported that throughout 2007 it received a total of 12 orders for new systems of its Integrated Revenue Management solutions. The new clients are reportedly some of the most well-known and respected telecom service providers from Europe, Asia and the Americas, including Tele2, CAT Telecom, and Rostelecom. Meanwhile, the company’s flagship FraudView product also remains strong with over 75 deployments worldwide, boasting the industry’s largest installed base for wireline and wireless operators and the market’s first solution supporting 3G and VoIP networks.

“In 2007, we continued to see strong demand for our Integrated Revenue Management solutions from international telecom operators, strengthening our position as one of the leading revenue management companies in the world,” said Mr. Itzik Weinstein, President and CEO of ECtel. “The complexity of today’s telecom market makes it essential for operators to install an effective revenue management platform. ECtel’s solutions provide our customers with crucial insight into their revenue chains, allowing them to save money and run their businesses as efficiently as possible.”

ECtel is also trading at an attractive valuation for a company with an industry-leading product. The company has almost have of its market value in cash - $1.40 per share - while maintaining a book value of around $2.71 per share. Despite its negative growth in recent years, the company does appear to be headed towards a turnaround with its new strong product offerings. If it succeeds, the cash stockpile it has will no longer be in jepardy and its share price will likely increase to reflect that fact. Right now, the firm is trading at some of its lowest levels of the year and may be a stock worth watching!

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Wal-Mart Stores Inc. (NYSE: WMT) has been mentioned in two articles over the past few days on SECInvestor.com, and for good reason - as the world's largest retailer with a $200 billion market capitalization and $350 billion in annual sales Wal-Mart has innumerable impacts on other companies and the U.S. economy as a whole. Today, it reported results that bode well for its future and the U.S. economy but not so well for its competitors, as Wal-Mart beat analyst predictions about its fourth-quarter earnings.

For the quarter ending January 31st, the company saw earnings grow 5.1% to $4.1 billion from $3.9 billion for the same quarter last year. The results were largely due to an 8% increase in sales to a staggering $106.3 billion - a record quarter for the company and the first time it cracked the $100 billion mark in quarterly sales. Interestingly, these results came even though consumer confidence in the economy continues to erode.

"Clearly our underlying operational performance exceeded the expectations we had at the beginning of the quarter,'' Chief Executive Officer H. Lee Scott said, admitting that to maintain it the economy will "be a critical factor."

Wal-Mart has been able to drive sales and foot-traffic from its expanding grocery and electronics businesses. Though the grocery business is notoriously low-margin, Wal-Mart is in the unique position to be able to attract customers with its expanded food offerings but monetize the traffic with its other product offerings.

Despite these promising results, when a company is nearing $400 billion in annual sales how much sales or profit growth is realistic moving forward? Wal-Mart management is in the unique position of having tremendous brand-recognition and traffic advantages, but they are also in the unenviable position of trying to further leverage those advantages to grow already huge results - with shares up only about 1% the market sentiment seems mixed on the future.

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Barington Capital is an activist hedge fund that has never had a bad investment, according to Dealbreaker magazine. The firm recently filed its Schedule 13F-HR filing with the SEC detailing its current holdings. Unfortunately, Barington has been holding many of its stocks for a long time which means that it may be too late for investors to trade alongside the firm. Luckily, the recent economic downturn has pushed many of these stocks down off their highs and may give investors and opportunity to invest alongside one of Wall Street’s greats. So, without further adieu, here are some of Barington’s top holdings for your consideration!

Barington’s largest holding is The Pep Boys - Manny, Moe & Jack (NYSE: PBY) in which it has a stake worth approximately $64,586,000. The automotive retail and service chain has been beaten down nearly 50 percent off of its highs of $22.49 trading now at just $11.45. The company has been struggling since it announced that its losses widened it would close stores, and reduce staff in November of last year. Recently, Pep Boys struck a deal with Lanelogic to enable its customers to sell used vehicles, which many analysts believe will boost profitability for the struggling company. Meanwhile, the Chairman of the Board also picked up 50,000 shares ahead of the announcement. And finally, the same strong fundamentals that prompted hedge funds like Barington to take a stake in this company still exist, making it a stock that is definitely worth watching!

Barington’s second largest holding is Lancaster Colony Corp. (NDAQ: LANC) in which it holds a $60,606,000 stake. The manufacturer and marketer of specialty food products is down about 25 percent off of its highs, but recently reported strong earnings that have sent shares higher. The company has also been buying back its own shares and eliminated and has very little debt. Activists made big money in this stock back in 2007 when the company divested its automotive accessory divisions. Its willingness to unlock value and strong fundamentals despite a troubled economy has made Lancaster a stock that is definitely worth watching!

Barington’s third largest stake is in A. Schulman, Inc. (NDAQ: SHLM) in which it holds $51,019,000 worth of stock. The stock is trading about 20 percent off of its highs for the year, but recently announced steps that it was taking to improve its profitability in North America. The company plans to shut down its manufacturing facility in St. Thomas, Ontario and to pursue a sale of its plan in Orange, Texas. This consolidation of production will improve overall capacity utilization and restore long-term profitability and stead growth to its North American operations. There has also been some speculation that the Schulman may pursue strategic alternatives after Ramius Capital installed two board members while Barington still holds a large stake. Combined, these factors make SHLM a stock worth considering!

Barington also holds stakes in Consolidated-Tomoka Land Co. (AMEX: CTO), Convergys Corp. (NYSE: CVG), Dillards Inc. (NYSE: DDS), Fisher Communications Inc. (NDAQ: FSCI), Griffon Corp. (NYSE: GFF), Macy’s Inc. (NYSE: M), and Syms Corp. (OTC: SYM). In the end, these are all stocks worth watching given the activist hedge fund’s impeccable record of success, especially given that many of them are now available at bargain basement prices!

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