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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