Standard Motor Products, Inc. (NYSE: SMP) shareholders may see some drastic changes is one activist hedge fund gets its way. GAMCO Investors, which owns around 10% of the company, spoke with executives on January 26th and made a series of proposals aimed at increasing shareholder value. The discussions were outlined in a letter attached to a Schedule 13D/A filing with the SEC.

Here’s what the letter said:

It was good chatting with Jim Burke and yourself today.  It gave me the opportunity to thank you for eliminating the dividend and positioning yourself to repurchase shares at a future date.

It also gave me the opportunity to suggest that you consider “a going dark transaction.”  As long as you trade in the Pink Sheets and provide continuing information to your shareholders, we would support such a transaction.  It is particularly cost effective in this Sarbanes-Oxley world.

As long as we are opening the door on financial engineering, we are holders of your convert for several of our clients.  These converts come due this July.  We would like you to consider extending the maturity by one-year and lowering the conversion price as an incentive.

I look forward to a continuing dialogue and with best regards.

The most interesting portion of this letter is the so-called “going dark transaction”, which is Wall Street code for a delisting. In this case, the hedge fund is supporting a delisting to the PinkSheets in order to save money on SarbOx compliance costs. This would likely reduce operating expenses substantially, but would also result in reduced liquidity for shareholders.

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Cowlitz Bancorporation (NDAQ: CWLZ) directors may face a fight during the next annual meeting after an activist hedge fund announced its own slate of directors. Crescent Capital, which owns 23.7% of the firm, continued its hostile takeover attempt with a new Schedule 13D/A filing with the SEC.

Crescent initially contacted the company with an all cash offer at $15.00 per share on July 27, 2007, but the board rejected the offer as not in the long-term best interest of shareholders. Since then, the bank has deteriorated substantially with its share price dropping to their current levels of around $5.85.

On March 6, 2008, Crescent’s representatives met with the board and discussed appointing a representative from the hedge fund to the board. However, the hedge fund was again rebuffed when the board declined to appoint any representative on April 21, 2008.

Crescent then sent a letter to the board nominating its own slate of directors for consideration during the company’s next annual meeting. Meanwhile, the bank has obtained some government funds and is seeking private money to expand its loan portfolio and reassure investors that it’s doing well.

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Location Based Technologies Inc. (OTC-BB: LBAS) is one micro-cap company that may be worth watching. The manufacturer of personal GPS tracking gear and software’s industry is expected to grow at an annual compounded rate of 104% through 2012, according to a research report by RNCOS. This equates to substantial increases in sales over the next few years along with a higher valuation for companies like Location Based Technologies.

Revenues are expected to jump from $63 million in 2009 to $1.1 billion in 2013 as the market for personal GPS locators is embraced by concerned parents, cautious pet owners, and prudent employers. Meanwhile, earnings before interest in taxes could increase from $1 million in 2009 to $198 million in 2013. Assuming a discount rate of 5% and a 0% terminal growth rate, this means the cash flow in today’s dollars would be about $648.5 million, or $7.30 per share.

The $7.30 valuation represents a steep discount to the current $1.01 share price if the assumptions prove to be correct. Most investors will likely wait until the firm receives some necessary approvals and begins making sales in order to take a position. However, those investors willing to take the additional risk and purchase the stock ahead of time could benefit from a sharp increase in share price over the next few years.

Location Based Technologies expects to begin selling its products in the first quarter of 2009. The Oreo-sized GPS devices can be placed almost anywhere and tracked via phone or internet. A strong network of distributors and tight cost controls should help drive value in this company over the next five years. Meanwhile, a strong patent portfolio continues to build value in its technology. For an in-depth research report on this company, including financial projections, click here.

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