The Cyberonics Corporation (NDAQ:CYBX) situation grew even more heated today after a series of communications between the Concerned Shareholder Committee front-runner Metro Capital and CYBX management. The saga began in early September when the hedge fund sent a letter to the company demanding that changes be made to the company's Board of Directors, saying: "if there was ever a question about the need for change at Cyberonics, recent events have provided an emphatic answer ... Our nominees will provide a much needed independent voice in the Boardroom, which will represent the start of the process of rebuilding shareholder value."

On Wednesday, Cyberonics responded to this proxy filing with a press release. According to the press release:

"Cyberonics met with representatives from Metropolitan Capital on June 9, 2006, in an effort to reach a cooperative solution. Shortly after that meeting, the Cyberonics Board invited Metropolitan Capital to submit the credentials for their director nominees to the Board's outside search firm for evaluation and consideration. This review is ongoing. Rather than proceeding in a cooperative fashion to the benefit of the Company and its shareholders, however, Metropolitan Capital has decided to pursue a potentially costly and disruptive proxy contest."

Today, Metro replied in another 13D/A filing with the SEC, stating: "In the interest of setting the record straight, we want to respond to a number of the misleading statements made in the press release issued by the Company last evening." So, what really happened? Let's take a look:

"The press release said that the Company met with representatives of Metropolitan Capital on June 9, 'in an effort to reach a cooperative solution.' In fact Cyberonics' representatives, Ms. Westbrook and Ms. Frank but not Mr. Cummins, met with us and many other investors, separately, in a series of meetings organized by Piper Jaffray, in an effort to support your flagging share price. The only portion of our meeting that might be construed as 'an effort to reach a cooperative solution' with us took place when the Company’s PR consultant asked us what we wanted. We responded that we wanted the Company to replace a minority of the existing Cyberonics board members with our nominees and to commit to implement long overdue corporate governance reform. It is highly misleading to imply that a special meeting took place to discuss our concerns and suggestions.

The remainder of the June 9 meeting involved the Company’s CFO, Pam Westbrook, walking us through the Company’s investor presentation (We notice that the Company’s investor presentations have been removed from the investor relations portion of the Company’s website. Does this mean that investors should no longer rely on the information in those presentations or is it simply the Company’s strategy to make it more difficult for investors to see the many examples of the Company over-promising and under-delivering?)."

What about the Company's contention that Metro decided to pursue a costly and disruptive proxy contest? The hedge fund also responded to these allegations:

"The depiction of the facts in this instance is also highly misleading because we had already provided all the information with respect to our nominees required by the Company’s advance notice provisions in the by-laws. After the June 9 meeting, we did not hear from the Company again until receiving a letter from the Company’s general counsel on July 25 (nearly two months after we provided notice to the Company of our nominations, along with the required information about our three nominees) that asked for further information about our director nominees. We responded with the requested additional information the very next day. In contrast, over the course of the last month our calls to Mr. Cummins and Ms. Westbrook have not been returned.

To be sure, we do not desire a 'costly and disruptive proxy contest.' What we want is for the Company to replace a minority of its insular board with our nominees, who will provide shareholders with the independent voice in the boardroom that this Company so desperately needs, and for the Company to commit to implement necessary corporate governance reform."

Why are shareholders so concerned about replacing the Board? A lot of the concern stems from the fact that CEO Robert Cummins has been practically minting money while shareholders have been footing large losses. An article on ExecutiveInvestigator highlights some of these concerns:

"So, just how much money is Mr. Cummins making? Well, he made the most money on June 15, 2004 when he and two other company officers netted a cool $2.5 million overnight – not bad for a day’s work! How is this possible, you ask? Well it turns out that the company just happened to receive a favorable FDA report with regards to their flagship product the day of their stock option grant. While trading was halted for the rest of us at $19.58 per share (the prior day’s closing price), they were issued 170,000 options at this price while the press release was circulated. The next day the stock opened at $34.81 per share – netting a whopping $2,589,100 overnight! Unfortunately for them, the SEC took issue and they are currently still under investigation.

However, in addition to that 'bonus', Mr. Cummins has also made an estimated $17 million in proceeds on the sale of shares received through stock option grants in addition to a substantial grant of restricted shares. This is not to mention his $800,000 per year regular salary. In fact, the executive compensation was in such excess that one board member actually resigned, saying that he 'cannot support the direction of the governance practices of the Cyberonics board, in particular its practices regarding CEO compensation and succession.'" (Read the rest here)

Clearly change is needed. Whether or not this can be done without a proxy contest remains to be seen; however, this is definitely a stock to keep an eye on as these events continue to unfold.

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Gateway, Inc. (NYSE:GTW)
13D/A Filing by Harbert Management
Harbert announced in an SEC filing today that it has raised its stake in Gateway to over 10%, after recently purchasing over 500,000 shares on September 27th. The fund also announced that it has entered into a confidentiality agreement with the company. This news comes after the company only recently rejected a $450 million bid by Hui for the company's retail operations.

ImClone Systems Inc. (NDAQ:IMCL)
13D/A Filing by Icahn and 8K Response by the Company
Carl Icahn and company sent a message to management today in an amended 13D filing stating that they were planning to move forward with their plans to solicit proxies and take over a portion of the Board. The company fired back two hours later with an 8K stating that they "are disappointed that Carl Icahn, a minority shareholder and director, is trying to seize control of the Company without paying a control premium to all ImClone Systems shareholders." The company told shareholders not to act until they have hard ImClone's side of the story.

PW Eagle (NDAQ:PWEI)
13D/A Filing by Pirate Capital
Pirate Capital revealed today that it had increased its stake in the company to 22.4%. This position represents an increasingly portion of Pirate's holdings (just over $72 million), which have recently been thinned out after it sold stake in OSI. As a result, this purchase in particular represents a strong vote of confidence on the part of Pirate management.

Imclone Systems Inc. (NDAQ:IMCL) revealed today in a 13D/A filing with the SEC today that Carl Icahn has filed his preliminary consent solicitation statement to remove Kies and others from the Board of Directors and replace them with his own nominations. This news comes after the 13.85% holder of the company announced that it would seek to remove Kies (past article).

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Talk America (NDAQ:TALK) revealed today in a 13D filing with the SEC that Sun Capital - a 13.9% owner of the company - offered to buy the company's outstanding shares. This comes one day after another majority holder complained about Cavalier's bid being too low.

According to the filing:

"The Reporting Persons delivered today to the Board of Directors of the Company a letter proposing to acquire in an all-cash merger transaction all outstanding shares of Common Stock at $9.00 per share, subject to completion of confirmatory due diligence for a maximum period of 30 days (the 'Proposal Letter')."

In the attached letter, the company gave a comprehensive overview of their bid:

"All-Cash Consideration. Sun Capital proposes to purchase for cash all of the outstanding shares of Company Common Stock for $9.00 per share (based on the Company’s public filings which reflect approximately 31.1 million shares of Common Stock outstanding on a fully diluted basis using the treasury method). As stated above, we propose that the transaction be structured as a single-step merger (although we remain flexible with respect to transaction structure to the extent an alternative structure is feasible and in the best interests of the Company’s stockholders).  Our proposal represents an approximately 11% premium to the pending Common Stock Consideration.

No Financing Contingency. Equity financing for this transaction will be provided by one or more of Sun Capital’s affiliated funds (“Funds”). As stated above, with more than $3.5 billion in capital presently under management and the ability to invest over $800 million in any single transaction, Sun Capital currently does not need to nor does it intend to partner (or “club”) with any other equity financing sources or co-investors with respect to this transaction. Financing for the proposed transaction (including all fees and expenses) would be fully committed by Sun Capital and affiliated funds at the date definitive transaction documentation is executed by the Company.

Due Diligence.  Upon execution of a confidentiality agreement, Sun Capital’s confirmatory due diligence would need to be completed to Sun Capital’s satisfaction. Such due diligence would include meetings with management and outside auditors, and a review of the Company’s books, records and legal documents by Sun Capital and its professional advisory team.  Such confirmatory due diligence would be completed in a maximum period of 30 days and definitive documentation would be completed in tandem with that time frame.

Management. It is Sun Capital’s current preference and intention to retain incumbent senior and middle management who desire to remain with the Company and join our team. It is our intention to offer appropriate cash and/or equity incentive compensation, and to provide appropriate retention programs and welfare benefits.

Execution Speed.  Sun Capital and its professional advisors are prepared to commence due diligence immediately following execution with the Company of a confidentiality agreement.  Immediately thereafter, Sun Capital would begin good faith discussions and negotiations with the Company and the Board and definitive transaction documentation would be prepared and finalized contemporaneously.

No Regulatory Delays.  As a U.S.-based private equity firm with no foreign control persons, we do not anticipate any delays in obtaining requisite regulatory approvals for the proposed transaction, including HSR, FCC and state commission licenses.  Sun Capital will work collaboratively with the Company to obtain such approvals, including making all necessary filings immediately following the signing of a definitive transaction agreement. Subject to other customary closing conditions, we would anticipate closing a transaction as promptly as possible."

The bid represents an 11% premium over the previous bid by Cavalier Telephone Corp., which drew crticism from investors for being too low at only $8.10 per share. Investors are now speculating as to whether Cavalier will start a bidding war by upping Sun's bid. It is worth noting that the company traded as high as $10 earlier this year, which means that some large investors responsible for making these decisions may still be underwater. Fundamentally, however, the company is trading significantly above its enterprise value with a forward PE of over 80x. So, whether a bidding war happens or not remains to be seen; however, this is definitely a stock to keep an eye on.

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Gateway Inc. (NYSE:GTW) announced today in a Form 4 filing with the SEC that Harbinger Capital Partners had acquired 505,700 shares on September 22 on the open market, bringing their stake up to 27,155,930. This news comes shortly afterway Gateway rejected John Hui's $450 million bid for the company's retail operations and did not comment on a possible offer to acquire all outstanding shares. It is also worth noting that Richard Snyder - a company Director - purchased 139,644 shares (about 60,000 of that being an award) with on the 19th. With Hui's second offer still on the table, a buyout at a premium to the current market price remains a possibility.

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Nabi Biopharmaceuticals (NDAQ:NABI) revealed today in a 13D/A filing with the SEC that activist hedge fund Third Point intends to "conduct shortly a consent solicitation in order to remove Mr. McLain and possibly one or more other directors from the Board of Directors". The fund also said it would "solicit consents in favor of a proposal requesting that one or more individuals named by the Reporting Persons be added to the Board to fill any vacancies created by the removal of directors". This news comes after the company expressed dissatisfaction with Chairman McLain after having difficulty obtaining financial records. If Third Point is successful in obtaining its Board seats it will likely seek "strategic alternatives" for the company, which may include an outright sale of the company.

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America Talk (NDAQ:TALK)
13D/A Filing by Flagg Street Capital
Flagg Street Capital - a 9% shareholder in the company - said today that the company's proposed buyout at $8.10/share does not reflect the full value of the company. The fund told the company that they, along with other large shareholders, would like to see a buyout at a higher price.

McDonalds Corporation (NYSE:MCD)
Company Watch
Reports surfaced today indicating that Bill Ackman of Perishing Square wants to buy $2 billion more in stock and may engage in a proxy battle to help unlock shareholder value. Perishing was involved with McDonalds in the past when they tried to convince the resturant chain to spinoff some of its real estate holdings; however, the measure failed after McDonalds instead agreed to special dividends and other measures to increase shareholder value.

Nabi Biopharmaceuticals (NDAQ:NABI)
Response to Third Point's 13D/A Filing
Nabi told investors today that it had retained the Bank of America to assist it in its efforts to seek strategic alternatives in order to unlock shareholder value. The company has been under increasing pressure lately by activist hedge fund Third Point, who criticized management's lack of action in the past and resistance to providing relevent financial information to investors.

P.H. Glatfelter (NYSE:GLT)
13D Filing by Pirate Capital
The company revealed today that activist hedge fund Pirate Capital had raised its stake in the company to 5.7%. Pirate Capital is well known as a champion of shareholders that will stop at nothing to unlock value - even if it means liquidating the company. The fund also received some press lately after it failed to disclose a series of divestures in OSI Restaurants and other holdings.

Eagle Materials, Inc. (NYSE:EXP) revealed some insider buying recently in several Form 4 filings with the SEC. On September 19th, Director Lawrence Hirsch purchased 400,000 shares on the open market in a transaction worth over $14 million - a significant amount for an individual. Richard Stewart, another director, revealed yesterday that he had also purchased 1,000 shares in a transaction worth over $35,000. Does this insider buying make sense?

Well, the company is the second largest maker of drywall - the very same industry that caught Warren Buffet's interest (however he's invested in the largest producer, USG Corp.). The stock's recent declines come as a result of the slowdown in residential construction, which accounts for 40-50% of the company's drywall sales; however, the company's commercial demand remains quite strong. Last quarter, the company saw a 27% rise in revenues and a 70% rise in earnings. Finally, the stock is trading at a P/E of just 11x with a PEG ratio of 0.20 and trading significantly below its enterprise value, all of which indicates that the company is severely undervalued.

Although the residential real estate market may not be doing so well right now, this company still benefits from the commercial side of the market and is available on the cheap! This stock is definitely worth keeping an eye on!

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Visteon Corporation (NYSE:VC) revealed today in a 13D/A filing with the SEC that Pardus Capital had increased its stake in the company to 14.1% and is also seeking Board representation. According to the 13D/A filing, Pardus is seeking to:

"continue to engage in discussions from time to time with management, the Board of Directors, other shareholders of the Issuer and other relevant parties concerning, among other things, the business, operations, board composition, management, strategy and future plans of the Issuer. In the context of these discussions, the Reporting Persons have raised with the Issuer the possibility of an individual suggested by them joining the board, and have been informed that the Issuer has taken this matter under advisement."

This news comes just as Visteon released an 8K filing announcing that they would cut their 2006 outlook and warned on second half sales:

"Johnston and Stebbins are expected to indicate that reductions to second- half customer production levels, changing vehicle mix, and other cost factors will challenge the company's financial results for the remainder of 2006. As a result, the company does not expect to meet the financial guidance targets announced on Aug. 1, 2006. The company currently expects second half product sales to be about 10 percent lower than first half product sales of $5.7 billion."

The company also took a blow yesterday when Valeo reportedly withdrew their bid for the company without explanation, after many speculated that the company was preparing to make an offer. Although this still remains a possibility, the Valeo management refused to make comments on the matter.

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Boeing Co. (NYSE:BA)
10K Watch
Boeing announced today in a press release that they had reached an agreement with FedEx (NYSE:FDX) to sell and modify almost 90 757's in a deal worth an estimated $2.6 billion. The acquisition is expected to have a strong impact on Boeing's earnings, while the startup expenses will not likely be material to the company.

Educate, Inc. (NDAQ:EEEE)
8K Filing
The company announced today that its CEO - along with several other officers and hedge funds - is offering $8 per share cash for the company in a bid to take the company private. The Board of Directors said it would review the bid in due time.

eHealth, Inc. (NDAQ:EHTH)
Ammended S-1 Filing
eHealth announced that its expected IPO price is between $10 and $12 per share with 5 million shares being sold. Lead underwriters include Morgan Stanley and Merrill Lynch.

Friendly Ice Cream Corp (AMEX:FRN)
Ammended 13D Filing
The company revealed today that The Lion Fund has consulted with the Chairman of the Board of Directors and management of the Company concerning the business, operations and future plans, and is seeking seats on the Board of Directors for Mr. Sardar Biglari and Dr. Philip L. Cooley.

Sizeler Property Investors (NYSE:SIZ)
8K Filing
Sizeler announced today that the bid from Compson Holdings is not as favorable as the previous bid from Revenue Properties Inc., taking into account all financial, legal, regulatory, and other information. This comes after an activist hedge fund involved with the company demanded a valuation.

UAL Corporation (NYSE:UAUA) - better known as United Airlines - moved up today on news that the company retained Goldman Sachs (NYSE:GS) to explore strategic alternatives. Those familiar with the situation say that the company is likely seeking a merger with Delta Airlines (DALRQ) or Continental Airlines (CAL). This news comes after UAL emerged from bankruptcy and the airline industry as a whole swung to a profit, with the help of lower fuel costs and more travellers. UAL enjoyed a share of this profit with strong performance last quarter; however, their stock remains one of the cheapest airline plays, trading at only 0.79x earnings (trailing). Any effort to unlock shareholder value could help this stock come to value at a significant premium to the current market price. Many traders are speculating that the company will require the help of a hedge fund or suitor in order to help it with any potential merger; therefore, a 13D and 8K filings would be the ones to watch as this situation unfolds.

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Titan International (NYSE:TWI) revealed on Friday that Jana had upped its stake in the company to over 22%. Although Jana didn't disclose anything noteworthy in this filing, they do have a long history in the company, which may help shed light on possible motives for the acquisitions. In October 2005, Titan was the subject of a proposed buyout at $18 per share buy One Equity Partners LLC. Jana was responsible for blocking this deal, after sending a letter to the Titan Board demanding either respond to its demands or explain why $18 per share was a fair price. Jana cited several reasons for its belief that Titan shares are undervalued at $18 in a both a SC 13D filing in October and a SC 13D/A filing with the SEC in December, where the company noted:

"... Pro-forma for the acquisition of Goodyear's agricultural tires business and adjusting for the non-operating assets, the $18 offer price represents only 5.6x trailing twelve-month EBITDA. For this reason, we believe any sale of the Company should either be postponed until the benefits of the Goodyear acquisition are realized, or alternately should be at a price which more appropriately reflects the added value that will arise following the close of this acquisition. We also would like to point out that just earlier this year Company management expressed to us a concern that a private equity buyer would attempt to buy the Company for $18, which management at the time described as less than fair value.

Other events have also strengthened our view that the proposed price falls short of fair value and fails to fully reflect the strength of both the Company and general industry trends. For example, reflecting strong industry fundamentals, the stock price of one of Titan's significant customers, Deere & Co., has increased by almost 17% since October 12, 2005, the day after One Equity's offer was announced. We believe that Titan's stock would have risen during this period as well, particularly given that the outlook for North American agricultural equipment sales continues to be strong in general, were it not being held down by One Equity's low bid. In addition, Titan Europe, in which Titan holds a 29% interest, saw its stock price increase by over 15% in the days following the announcement of an acquisition which would materially increase its size and provide significant operating synergies. We believe it is reasonable to assume that were it not for the proposed sale to One Equity at $18 per share, Titan's share price would have also seen the benefit of this acquisition by Titan Europe."

Since this time, the stock has trended down from around $20 to its current levels right around the mid $17 per share. The company has made an effort to cut costs by laying off some employees, while it has made headway in its own efforts by signing several new contracts with both Deere & Co. and Grove, among others. Whether or not the company can turn itself around remains to be seen; however, this move by Jana should be encouraging for long-term investors. This is definitely a stock worth watching.

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Banta Corporation (NYSE:BN) announced yesterday that they had received a letter from Cenveo dated September 20th, in which Cenveo proposed a business combination transaction involving the company. Banta said that it "is in the process of reviewing the proposal and will respond to Cenveo as appropriate in due course". What did this letter say? Well, Cenveo had a few kind words for Banta's Board regarding the transaction:

"As you might expect, following our prior proposals to acquire Banta, we were amused to read in your press release on September 14th that Banta has adopted "strategic initiatives" to "create value for shareholders." At Cenveo, we are always working to create value for shareholders and do not wait until we have received proposals from third parties to do so

We were also disappointed to hear on your carnival-like conference call that you continue to refer to Cenveo's $47.00 per share fully-financed, all-cash proposal for Banta's shares as "illusory". To reiterate what I stated in my letter of September 5th, we have obtained committed financing to complete this acquisition from Lehman Brothers and Wachovia ... I personally believe that you and the Banta board have breached your fiduciary duties to shareholders by taking actions to entrench yourself by not responding to my September 5, 2006 letter and the $47.00 per share proposal to purchase Banta.

Further, to say, as you did on your call, that we were unable to reach an agreement on the terms of a "standard" confidentiality agreement is a joke. We have offered to meet with you and to provide you with information about our commitment from Lehman Brothers and Wachovia WITHOUT OBTAINING ANY CONFIDENTIAL INFORMATION FROM YOU. Why do you need a confidentiality agreement when we are not asking for any confidential information at this time?

The fact that you and your board continue to hide behind your poison pill is in my view 110% un-American. A level playing field is required in order to permit Banta shareholders to decide who manages their company, not a poison pill. As you stated on your most recent conference call, your poison pill is in place to "make sure that your shareholders have the benefit of long-term look at the future." Shareholders now have had plenty of time to review your plan. Therefore, the pill is no longer necessary and we believe it is the board's fiduciary obligation to remove the poison pill and let the shareholders decide the future of Banta."

But is $47 a good deal for shareholders? Well, the stock was trading at around $50 before the company durastically lowered is FY 2006 guidance in July before raising them suddenly in September. However it is difficult to argue that the company is undervalued right now. Although it has a PE of around 17x, it has a PEG of almost 2.87, which is highly overvalued. The company does have a strong cash position and low debt; however, the company is still trading well above its enterprise value. Either way you look at it, $47 is a good price for this stock unless management is capable of executing some other plan to unlock shareholder value in the near term, which doesn't appear to be the case.

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DivX, Inc. (NDAQ:DIVX) is up 13% in mid-day trading today on its debut on the NASDAQ. Those familiar with technology know DivX very well as one of the most popular codecs on the market for compressing video. But the company also licenses its technologies to consumer hardware device manufacturers and certifies their products to ensure the interoperable support of DivX-encoded content.

Let's take a look at whether or not the company is a good buy... Financially, Divx has done extremely well. The companies revenues tripled between 2003 and 2004, and more than doubled between 2004 and 2005. Notably, the company also achieved profitability in 2005 with a net income of $2,295,000 or $0.05 per share (diluted). As of December 31, 2005, the company also had a strong cash position of over $25 million with only $1.2 million in debt and a deficit of $19.4 million. This is a rather healthy balance sheet for a technology company that is just IPO'ing. But are the revenues sustainable? First, let's look at where they are coming from; according to their S-1 filing:

"We derive most of our revenue from the licensing of our technologies to consumer hardware device manufacturers, software vendors and consumers. We derived 81%, 75% and 55% of our total revenues from licensing our technology in 2005, 2004 and 2003, respectively ... In the year ended December 31, 2005, Philips accounted for approximately 13% of our total revenues, and our top 10 licensees by revenue accounted for approximately 41% of our total revenues."

The company also relies on an agreement with Google:

"Revenues under the Google agreement represented approximately 15% of our total revenues in 2005. We currently include Google software in both the basic and enhanced versions of our software that we make available to consumers at no cost from our website. In exchange for offering the included Google software to our consumers, and the subsequent activation of the software by those consumers, Google pays us royalties based on specific performance targets."

At first glance, this seems like bad news. With an increasing amount of their total revenues coming from one market (licensing) and only a few key customers, there is a risk that these deals could go bad, which would significantly impact the company's bottom line. However, as long as the DivX brand name remains strong and their technology keeps evolving, it should not be difficult for the company to retain these contracts. Many public companies have survived with non-diversified revenue streams, including Google! However, it is important for investors to watch the market for competitors and keep an eye on the revenue numbers in the future.

Overall, DivX appears to be a relatively stable company now with its main risk being in non-diversified revenue streams. The shares are trading at a premium now after the IPO, but the company could make a great buy in the near future after the shares settle down. It is a great stock to keep an eye on!

Tribune Company (NYSE:TRB) shares are up over 5% today talk of a possible LBO as the Board contemplates the company's future direction. The company has drawn a lot of criticism by shareholders close to the company after slowly trending from $50 in 2004 to just $30 per share now. Specifically, Tribune has been taking a lot of heat from its second largest shareholder - Chandler Family Trusts - especially after the company failed in its bid to buyback of 25% of its outstanding shares a couple months ago. After this, Chandler Family Trusts suggested that the company spin-off its TV division or putting the entire company up for sale.

It appears that the Board is now acting on this advice... The WSJ is reporting that the company is considering either a leveraged buyout (LBO) in an effort to take the company private or spinning off its TV group. Either situation would generate value for shareholders, as LBOs come at a premium to the market price while spinoffs generally outperform the market. While nothing is certain now, this is an interesting situation that is definitely worth watching.

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Pier 1 Imports, Inc. (NYSE:PIR) revealed today in a 13D filing with the SEC that Jakup a Dul Jacobsen and Lagerinn ehf now hold 9.82% of the company. The filing also revealed an even more interesting fact - these two parties entered a confidentiality agreement with the company, during which they will obtain "evaluation material":

"On September 19, 2006, Lagerinn ehf ("Lagerinn") and the Issuer entered into a Confidentiality Agreement (the "Confidentiality Agreement"), a copy of which is attached hereto as Exhibit G. Pursuant to the terms of the Confidentiality Agreement and in connection with Lagerinn's consideration of a possible negotiated transaction with the Issuer, the Issuer agreed to make available to Lagerinn certain Evaluation Material (as defined in the Confidentiality Agreement)."

It is worth noting that this group of investors is the same one that bought Pier 1's England subsidiary back in March of this year for $15 million. The fund also has close ties with related companies, including Linen N' Things, Cost Plus, and others. These two facts have led to investor speculation that Pier 1 may be a potential buyout or merger target, either by the fund itself or one of these related companies.

The company has been hurting ever since late 2003 when it began its decline from $25 down to its current levels around $7-8 per share. With a market cap hovering right around the company's enterprise value - the stock is decently valued, with around $1.72 per share in cash. Although the company has poor operating margins and six straight quarters of losses, it's brand and scale might make it a potentially valuable aquisition for a related retailer. This is all speculation at this point; however, the stock is definitely worth watching as the story unfolds. Pier 1 is up over 8% on the news.

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Riverbed Technologies, Inc. (NDAQ:RVBD) are up over 50% today in the company's debut on the NASDAQ. This move comes after the stock had already priced above its expected range of $7.00 to $8.50, by IPO'ing at $9.75. Why all the excitement? Well, Riverbed has developed unique technology that may disrupt an established market - something investors love to hear. According to their S-1 filing with the SEC:

"Riverbed® has developed an innovative and comprehensive solution to the fundamental problems of wide-area distributed computing. Historically, computing within an organization across wide area networks (WANs) has been plagued by poor performance, IT complexity and high cost. Our Steelhead® appliances enable our customers to improve the performance of their applications and access to their data across WANs, typically increasing transmission speeds by 5 to 50 times and in some cases up to 100 times. Our products also offer the ability to simplify IT infrastructure and realize significant capital and operational cost savings."

They also noted several specific benefits that their company's products and services offer consumers:

• accelerate performance of applications and access to data over the WAN;
• consolidate geographically distributed IT resources;
• reduce the need for WAN bandwidth;
• shorten storage back-up and replication time over the WAN;
• provide local storage for continued access to remote files during WAN failures; and
• improve productivity and reduce frustration for IT managers and end-users.

However, there is one problem with the company - they are not yet profitable:

"We have not yet achieved profitability. We experienced a net loss of $17.4 million for the year ended December 31, 2005. As of December 31, 2005, our accumulated deficit was $31.5 million. We expect to continue to incur losses, and we may not become profitable for the foreseeable future, if ever. We expect to make significant expenditures related to the development of our business, including expenditures to hire additional personnel relating to sales and marketing and technology development. In addition, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We would have to generate and sustain significantly increased revenue to achieve profitability. Our revenue growth trends in prior periods are not likely to be sustainable, and we may not achieve sufficient revenue to achieve or maintain profitability. We may incur significant losses in the future for a number of reasons, including those discussed in other risk factors and factors that we cannot foresee."

While the company's revenue growth numbers are impressive (nearly tripling year over year), the fact is that their expenses have increased at a greater rate than their revenues between 2004 and 2005 (the only measurable period in their pro-forma). So, while the company may have an innovative product that is capable of disrupting an established market, they have yet to prove that their company is capable of executing their strategy to become profitable. Although this is the case for most public companies when they first IPO (after all, they are raising money), it does make the investment significantly more risky, especially when the stock rises over 50% on its first day of trading.

Hewlett Packard (NYSE:HPQ)
8K Material Events Filing
The company received a request from the Division of Enforcement of the Securities and Exchange Commission for records and information relating to the resignation of Mr. Perkins from HP’s Board of Directors, certain Form 8-K filings with the SEC, and investigations conducted by HP or any of its directors into possible sources of leaks of HP confidential information.

Lenox Group (NYSE:LNX)
13D Filing by John Morgan and Co.
John Morgan and his associates disclosed a 7% stake in the company and expressed dissatisfaction with the Board of Directors' performance and direction of the company. Shares moved up 6% on the news.

Move Inc. (NDAQ:MOVE) is owner of Move.com and a series of other web portals designed to connecting real estate buyers and sellers, including Realtor.com - the official NAR (National Association of Realtors) portal. The stock, which was up to around $7 per share earlier in the year, is now on the rise again. So, is it a good time to buy? Let's take a look...

When looking at the macro picture surrounding the company, it is not difficult to see that there is trouble in the housing market. Rising interest rates make it more expensive to own a house because of the higher financing costs. More expensive loans end up pricing people out of the market, which reduces housing demand. The reduction in demand causes the price of houses to decrease, which is what we are currently seeing in many housing markets. The reduction in both demand and price are not good for realtors, as they must face both reduced demand for housing and a reduced commission (due to lower selling price). These two factors may decrease the deal flow seen at web portals like Move.com.

Since they operate an Internet portal as their primary business, we can partially qualify this thesis using Amazon's Alexa. This Alexa report shows the downward trend of traffic going to their main portal, Move.com. This reduction from a high of around 15 - 18 million visitors per day down to 8 - 10 million visitors per day is quite significant, and is likely at least partially attributable to the economic environment (since sales and marketing expenses were up during the same period).

There are also problems with the company itself - most notably, the fact that they don't make money (on a GAAP basis). According to their own 10K filing with the SEC:

"We have incurred net losses every year since 1993, except for modest net income in 2005, including net losses of $7.9 million and $47.1 million, for the years ended December 31, 2004 and 2003, respectively. As of June 30, 2006, we have incurred a modest net loss and have an accumulated deficit of approximately $2.0 billion ... certain business model changes that will require considerable investment with no assurances that our future financial performance will be enhanced by these new initiatives."

The most troubling issue is the fact that during the United States' largest real estate boom, the company was not only unable to turn a profit, but actually accumulated a $2 billion deficit! And now after the boom is (arguably) over, the company still retains an enterprise value (EV) of over $640 million. Even if the company is a clear market leader with an increasing share of the online real estate listings market (which is debatable), the company still faces both macro-economic and internal issues that it needs to resolve before becoming profitable. The company could also face antitrust issues relating to their exclusive relationship with NAR, assuming that the online real estate listings market continues to grow as fast as it is (expected to double by 2010). Finally, the company is in the process of changing its web portals, and the success of this depends largely on how well customers accept these new online destinations. Overall, it would be best to hold off on any investment in MOVE until the company achieves profitability and is able to demonstrate that it can drive traffic to its new portals.

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The daily digest is a new addition to the blog that highlights five of the most noteworthy forms filed with the SEC every day...

Ahold (NYSE:AHO)
On Watch for 8K Filings
The company is reportedly under pressure from hedge funds to break up the company and may be looking at a merger with Delhaize (according to Reuters), although many remain skeptical.

Eagle Materials (NYSE:EXP)
Form 4 Filing by Chairman
Chairman Laurence Hirsch revealed today that he has purchase 400,000 shares of the company's stock between $34.68 and $35.77 through the week. The stock is trading up over 12% on the news.

Imclone Systems Inc. (NDAQ:IMCL)
13D Filing by Carl Icahn and Co.
Carl Icahn disclosed a 14% stake in the company and said that he wants Director Kies to leave the Board of Directors. Shareholders recently re-elected Kies as Director while also electing Icahn as a Board member.

Marsh & McLennan Companies, Inc. (NYSE:MMC)
8K Filing Noting Putnam Valuation
Item 8.01 in the company's latest 8K filing notified investors that it was conducting a valuation of its subsidiary Putnam, citing several parties that were interested in a potential merger or acquisition of the division.

Palm, Inc. (NDAQ:PALM)
On Watch for 8K Filings
CNBC mentioned today that Palm is higher on takeover rumors. Any substance to these rumors would be found by looking for 8K material events filings or perhaps even insider buying.

Imclone Systems Inc. (NDAQ:IMCL) revealed today in a 13D/A filing with the SEC that Carl Icahn and Co. now own almost 14% of the company. The activist investor has been trying to replace the management and turn around the company for some time now. The stock continues to slowly decline as operating results fail to improve, while the company was unsuccessful in finding a buyer back in July. While the company is about even on the year, it has recently dropped from a high of $42 in May to its current levels of around $28 per share.

Carl Icahn believes that the problem lies with David Kies. In an attachment to this latest 13D filing, Mr. Icahn enclosed a letter asking the Chairman to immediately step down:

"Now that I am becoming a director of ImClone, I am asking you again for the good of ImClone and its stockholders to give up your position as Chairman of the Board. Given what I consider the sorry record of the Company under your watch, it is time for you to step aside and allow someone else to be elected. You have even admitted to me that the board has done a bad job. ImClone has been without effective leadership for almost three years.

You should recognize that your leadership of ImClone should come to an immediate end. The time has come for you to  peacefully  pass the baton to a successor who will be able to bring strong  leadership back to ImClone.  If you fail to do so, you will have thrown down the gauntlet and we will have to react accordingly."

Also in the letter, Carl Icahn noted several of Mr. Kies failures as Chairman of the company:

• ImClone has suffered as a result of its inability to attain the leadership position it should enjoy as an important biotechnology company.
• Commercialization has suffered, trials have not been sufficiently  pursued, the head and neck data was needlessly delayed, patent suits have been lost and the Company has not provided its stockholders the performance that they deserve.
• ImClone hired a President and CEO who was totally the wrong person for the position and it took the company many many months to recognize this and replace him. His replacement lasted only a few months. Now, ImClone has another interim CEO and his permanent replacement is nowhere on the scene.
• ImClone's meaningful lead relative to potential competitors has shrunk considerably and ImClone has suffered reversals such as the loss of the patent suit in the past week.

Clearly Mr. Icahn believes that many of the company's failures are attributable to Kies, which makes his removal necessary in order to unlock shareholder value. The activist investor is known for taking any actions necessary to accomplish his agenda. And with a 14% stake in the company, we can be sure that Mr. Kies will not remain with the company for very long. With new management and leadership, perhaps this company can turn itself around and once again establish itself as a leader in their market. It is definitely a stock worth keeping an eye on!

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Star Scientific Inc. (NDAQ:STSI) announced after-hours in an 8K filing with the SEC on Monday that it had received a letter from Judge Marvin J. Garbis of the U.S. District Court of Maryland regarding its longstanding patent infringement lawsuit with R.J. Reynolds Tobacco Company. The letter noted:

"I have Mr. McMillan’s letter of September 5, 2006 and understand all parties' interest in moving the case to final resolution. I shall try to issue decisions on the pending matters within a month."

What is this patent lawsuit about? According to their latest 10K filing with the SEC:

"In May 2001, Star filed a patent infringement action against RJR in the United States District Court for Maryland, Southern Division to enforce Star’s rights under U.S. Patent No. 6,202,649 (‘649 Patent), which claims a process for substantially preventing the formation of TSNAs in tobacco. On July 30, 2002, the Company filed a second patent infringement lawsuit against RJR in the same Court based on a new patent issued by the U.S. Patent and Trademark Office on July 30, 2002 (Patent No. 6,425,401). The new patent is a continuation of the ‘649 Patent, and on August 27, 2002 the two suits were consolidated."

The company also stated that it would immediately appeal if it did not win the case. Although the results of the case have yet to be unveiled, we do know there will likely be significant volatility in the wake of the decision - this makes STSI an interesting potential options volatility play. Either way, this stock is definitely worth watching, as this event is very material to the company's future.

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Carmike Cinemas Inc. (NDAQ:CKEC) revealed today that Watershed Asset Management had increased its stake in the company to 6.7% and nominated one of its own to the company's Board of Directors. Watershed has had an investment-only interest in the company for a long time. Back in October 2005, the fund made several recommendations to the Board in a letter attached to a 13D/A filing with the SEC:

1. Eliminate growth capital expenditures
2. Seek amendments to your bank documents and bond indentures to increase restricted payments flexibility
3. Buy back stock with excess cash; if consent from bondholders can not be secured, buy back bonds at a discount
4. Increase your dividend
5. Begin evaluating options to extract value from your real estate portfolio
6. Communicate your new free cash flow strategy

The fund summarized:

"In summary, we believe that,despite the troubles that Carmike has experienced over the last three quarters, the  compan has a number of practicalmopportunities to improve its return to investors. Moreover, with a rebound in box office performance to 2003 or 2004 levels, Carmike's EBITDA, adjusted for the GKC acquisition, could be $115 million or more. Free cash flow available for shareholders could exceed $60 million. With discipline on capital expenses and a commitment to deploy cash with a view to enhancing shareholder value, Carmike's shares would trade dramatically higher."

Since then, the stock has dropped further from a high of $35 to its current levels of $17 per share. Watershed is likely attempting to remedy the situation by electing its own member to the Board in an effort to further influence these changes within the company. In an 8K filing with the SEC yesterday, the Board announced that its current Director - James J. Gaffney - would not be running for re-election, and the company would recommend Watershed's Kevin D. Katari to shareholders. This Board spot will enable Watershed to help the company execute its plan to enhance shareholder value, and ultimately increase the stock price. This makes CKEC a stock definitely worth watching during the next few months.

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The Rowe Companies (AMEX:ROW) announced today that it would commence voluntary proceedings under Chapter 11 in an attempt to restructure the company and return it to profitability. The company has been beaten up from its highs of nearly $6 in 2005 to its current price of just $0.43. The company announced that it plans to sell off its retail division - Storehouse, Inc. - so it can focus on its core manufacturing operations. Meanwhile, Rowe intends to continue with business as usual with not even a payroll modification.

So, why is this company worth noting? Well it turns out that bankruptcies can provide investors with great opportunities to profit. The key is not in buying stock now, but rather after the company emerges from bankruptcy. Often times these companies will issue new shares to creditors, which the creditors have no interest in keeping. Therefore, there is almost always a sell off that floods the market with cheap shares. It is also important to look at the "new" company's financials once (and if) they emerge from bankruptcy. Rowe will likely report pro-forma earnings that will show whether the company is performing poorly overall due to bad management, or whether the retail segment was responsible. If it was only the retail segment causing trouble, and the company has sold it off, Rowe could be an attractive investment long-term.

Not all companies perform great after emerging from bankruptcy, but a combination of creditor selling pressure and a sale of any poorly performing segments tilts the odds in investors' favor. This stock is definitely one to watch as this situation unfolds...

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Napster Inc. (NDAQ:NAPS) announced yesterday that it was hiring UBS AG to assist the Board of Directors in reviewing strategic alternatives, which could include a sale of the company. The company noted that this decision came as a result of unnamed third parties that expressed interest in a possible business combination or acquisition. In the press release, the CEO noted:

"Our goal is to enhance shareholder value which could potentially lead to a new strategic partnership or the sale of the company but in any event our primary focus will remain on growing Napster."

The CFO also highlighted the company's strong financial position:

"Napster has a strong balance sheet with a healthy cash position of $97 million as of the close of the first quarter and we are currently generating annual revenues in excess of $100 million."

While the company certainly is not cheap by traditional measures, it does have some things going for it. With the new flurry of new products and deals in the music industry, many were expecting this kind of consolidation. The online music market is only going to grow, and Napster has a strong brand name and a large customer base. The stock is currently up over 15% on the news. As of now, we can only speculate on a buyout price; however, any future announcements will come in the form of a press release or 8K filing with the SEC - this stock is definitely one to keep an eye on!

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Cost Plus, Inc. (NDAQ:CPWM) - more commonly known by its brand name "World Market" revealed today in a 13D filing that Red Mountain Capital Partners LLC had taken a 6.2% stake in the company.

In the filing, they noted:

"Red Mountain acquired the Common Stock reported in this Schedule 13D for investment purposes because it believed that the Common Stock was undervalued and represented an attractive investment opportunity.

Red Mountain has met with the management of Cost Plus and expects to maintain a dialogue with management regarding, among other things, Cost Plus’ operations, strategic direction, capital structure and corporate governance and Red Mountain’s expectation that management will pursue appropriate measures to enhance shareholder value. In addition, Red Mountain may communicate with other persons regarding Cost Plus, including, without limitation, the board of directors of Cost Plus, other shareholders of Cost Plus and potential strategic or financing partners.

Red Mountain may, at any time and from time to time, take such actions with respect to its investment in Cost Plus as it deems appropriate, including, without limitation, (i) proposing measures which it believes would enhance shareholder value, (ii) seeking representation on the board of directors of Cost Plus, (iii) purchasing additional Common Stock or other securities of Cost Plus, (iv) selling some or all of any securities of Cost Plus held by Red Mountain, (v) proposing, whether alone or with others, a transaction that would result in a change of control of Cost Plus, or (vi) otherwise changing its intention with respect to any of the matters referenced in this Item 4."

This is good news for shareholders of the stock, which has declined from $40 in early 2004 down to its current levels of around $11 per share. Currently the company is trading below its enterprise value of $15.16 per share with a forward P/E of 21x. Any further improvements in the company's bottom line and capital structure would make it substancial undervalued - possibly even a potential buyout target, given the company's market reach. This is definitely a stock worth keeping an eye on!

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We covered Advancis Pharmaceuticals Corporation (NDAQ:AVNC) in an article back on August 18th. We noted that the company had successfully successfully achieved its Phase III PULSYS trials, which demonstrated that it's drug distribution technique was effective. Moreover, we noted a 13G filing (a more passive version of the 13D) which indicated a 17% ownership stake by Deerfield Capital Management - a fund that invests in "special opportunities".

New developments at Advancis make the situation more promising. On September 13th, the company announced that "it has received correspondence from the U.S. Food and Drug Administration (FDA), confirming that the Company's recent successful Phase III clinical trial, along with other data, would be considered adequate for filing a New Drug Application (NDA) via the 505(b)(2) regulatory pathway." The company anticipates filing the Amoxicillin PULSYS NDA in December 2006 or January 2007.

The stock is currently trading around $5.13 per share, up over 20% since our first mention of the company.

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National Atlantic Holdings Corporation (NDAQ:NAHC) revealed on Friday that 8.2% holder, The Commerce Group, Inc. (NYSE:CGI), may be interseted in more than just an investment. According to the 13D filing:

"The purpose of this statement is to report that Commerce is in the process of evaluating a potential transaction with the Issuer, including the possibility of entering into a business combination or other strategic transaction with the Issuer such as an acquisition.

Whether Commerce decides to pursue any action as described above will depend on its continuing assessment of pertinent factors, including without limitation the following:  the results of its due diligence review of the Issuer; the Issuer's and Commerce's business and prospects; the outcome of discussions and negotiations between Commerce and the Issuer concerning the terms and conditions on which any potential transaction described above would take place, including, without limitation, the purchase price for the Issuer's common stock; other business and investment opportunities available to Commerce; general economic conditions; stock market and money market conditions; the attitude and actions of the management and Board of Directors of Commerce or the Issuer; the availability and nature of opportunities to dispose of Commerce's interest; and other plans and requirements of Commerce."

The stock is up over 5% today on the news to $11 - a continuing recovery from its $8.50 lows in late June. The stock has a forward P/E of just over 7 along with over $2.90 per share in cash with no debt - making it a decent acquisition target. However, it is worth noting that the current enterprise value of the stock sits at only $7.29 per share, which reduces the likelihood of any large premium over the current price in the event of a merger or buyout. Despite this, the stock is definitely worth watching as this story unfolds.

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Regular readers of our blog may remember Sizeler Property Investors, Inc. (NYSE:SIZ), which we covered back on September 7th, when the company received a letter from Opportunity Investors questioning why they weren't reviewing competitive bids. Well, Sizeler announced yesterday in an 8K filing with the SEC yesterday that it finally would consider the rival bid from Compson.

The company also revealed more details about the bid: It turns out that the bid is structured as an asset purchase, rather than a bid for the company as a whole. This means that the $16.10 per share would be paid for the real estate holdings of Sizeler; however, other company assets and liabilities would remain. The company said that the actual value to shareholders would be less than $16.10 per share; however, they are still currently working to review the bid.

Interestingly, about 10 minutes later, Revenue Properties Co. (with whom the company has the merger agreement at $15.50 per share) filed a 13D/A pointing out the flaws in the Compson bid:

"Among other relevant aspects of the Proposal, we would note the following: (1) the Proposal is non-binding and subject to negotiation of definitive documentation, (2) the Proposal relates to a purchase of assets only (and not a purchase of the public entity) and, as such, (i) Sizeler (and indirectly its stockholders) would continue to be responsible for significant wind-up costs, (ii) the actual receipt of consideration by Sizeler's stockholders would necessarily be subject to increased risk and delay, and (iii) Sizeler's stockholders would, we understand, be liable as transferees under State law for any liabilities of Sizeler that are not assumed or paid off by the purchaser under the Proposal, (3) while the Proposal refers to debt financing, a commitment letter was not included with the Proposal, (4) the Proposal appears to suggest that only $20 million of equity would be available for the transaction, (5) the Proposal calls for a break-up fee of $12 million, (6) the Proposal includes additional closing conditions relating to asset conveyances and estoppel certificates, and (7) while the Proposal does not seem to contemplate a "diligence out" in the definitive documentation, there appears to be an information review process
built into the Proposal."

The final valuation on the deal have yet to be determined by the company's analysts; however, the door is still open for a more competitive bid from either side. It is possible that Opportunity Investors and other majority holders may also want to review the proposal before siding with either offer. Currently investors are remaining prudent with shares sitting around $15.34 - up 2% since our first mention of the stock.

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We posted Goldman Sachs Group, Inc. (NYSE:GS) earnings announcement on September 12th, which was released a few days before other companies in its industry (investment banking/brokerage). Days later, most of the other brokerages that announced similar results that caused their stocks to move up on the news. Despite how obvious this concept may seem, many investors do not realize this correlation between companies within the same industry. Note the chart below, which illustrates Goldman Sachs (GS), Morgan Stanley (MS), and Lehman Brothers (LEH) - the three major players in the investment banking/brokerage industry:

Notice the strong correlation between the three companies - especially the jumps in price after the earnings announcements. Depending on the market, many large companies announce earnings similar to their peers. Therefore, if an early-reporting company beats analysts with strong earnings, it is worth the time to check out other companies in the industry. This is especially true if the operating results note a strong "macro environment" helping their growth as opposed to internal changes.

You can find companies in the same industry by visiting Google Finance, and you can find their 8k and 10k filings at SECFilings.

Lone Star Steakhouse & Saloon Inc. (NDAQ:STAR) recently passed the U.S. antitrust milestone, but may face another roadblock after new information surfaced today that may put its proposed buyout at risk. In a 13D filing with the SEC, the company disclosed that Deutsche Bank had upped its stake to 9.8%. Moreover, the bank noted in its filing that it "decide to vote against the transactions contemplated by the Merger Agreement and may seek appraisal of the fair value of its shares". This filing comes shortly after activist hedge fund Barington Capital noted (in its 13D filing) that "based on its analysis to date, it believes that the transaction consideration fails to provide adequate value to the Company’s stockholders". Barington also notes (in an attached press release) that their opinion is also shared by other experts:

"The transaction, which is subject to stockholder approval, would only provide stockholders with a 15% premium to the closing price of Lone Star's stock on August 17, 2006, the day before the deal was announced. Barington notes that Lone Star's stock has traded higher than the transaction price less than three months prior to the date the deal was announced. Barington also notes that CL King & Associates' analyst Michael Gallo has reported that the $27.10 share price looks low in their view and that Oppenheimer & Co. analyst Michael Smith currently rates Lone Star a buy with a 12-month price target of $32 a share. Based on Barington's evaluation of the transaction thus far, Barington does not believe that the consideration adequately reflects the value of the Company's extensive real estate holdings and upscale Sullivan's and Del Frisco's restaurant brands."

Combined, these two shareholders own 19.2% of the company's outstanding shares. With so much uncertainty surrounding the situation, the company may face a tough proxy vote in the fourth quarter of this year (to be announced before Oct. 15th). Meanwhile, the CEO of the company revealed in an August 28th filing that his stock and options would enable him to make roughly $80 million after the transaction. With 1,178,639 options at $12.41 per share, the CEO has a strong interest in making this transaction go through. If the merger fails, the CEO's risk-free options money will have to be exercised - costing him over $14 million while taking the additional risk of the company underperforming in the future. Whether or not the vote goes through remains to be seen, but with the stock currently trading above the buyout price, some investors are banking that new bidders will surface or the company will be saved by Barington and company. This stock is definitely worth keeping on the radar as this situation unfolds.

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Zunicom, Inc. (OTCBB:ZNCM) announced on September 12th that it would be spinning off its wholly owned subsidiary, Universal Power Group. The new supply chain logistics company would trade on the Amex with the symbol UPG. In UPG's S-1 statement with the SEC, they elaborate on their company:

"We are (i) a third-party logistics company specializing in supply chain management and value-added services and (ii) a leading supplier and distributor of portable power supply products, such as batteries, security system components and related products and accessories ... These services enable our customers to operate more efficiently and enhance their business by providing them with cost savings through effective sourcing, reducing inventory maintenance levels and streamlining distribution and order fulfillment. In addition, we also source and distribute batteries and portable power products under various manufacturers’ and private labels, as well as under our own proprietary brands, UPG™, Adventure Power®, UB Scootin®, Batteries & Beyond™, Charge N’ Start™ and UNILOK™. We believe that we have one of the largest inventories of batteries in the United States and are one of the leading domestic distributors of sealed, or “maintenance-free,” lead-acid batteries.

Our customers include original equipment manufacturers (“OEMs”), distributors and retailers, both on-line and traditional. The products we manage and distribute are used in a diverse and growing range of industries, including automotive, marine, recreational vehicles, medical devices and instrumentation, consumer goods, electronics and appliances, marine and medical applications, computer and computer-related products, office and home office equipment, security and surveillance equipment, and telecommunications equipment and other portable communication devices. Our largest customer is Brink’s Home Security (“Brinks”), one of the largest installers of security systems in the United States.

In each of the last nine years we have achieved double digit growth in net sales. Over that nine-year period, our compound annual growth rate in net sales was 32.86%. Similarly, our income before taxes has grown in four of the last five years. Over that five-year period, our compound annual growth rate in income before taxes was 18.26%. For 2005, our net sales were $81.3 million, and our income before taxes was $1.9 million. For the six months ended June 30, 2006, our net sales were $44.2 million, and our income before taxes was $1.2 million."

Unlike most spinoffs, this company has a long operating history (having first organized in 1968) - this removes one of the key risks associated with spinoffs. However, this stock does have one big risk - Brinks Security accounts for nearly 50% of their business. Although they have been lowering this number during the past few years, the loss of Brinks would be a significant hit to the company's earnings. The contract with Brinks is up for renewal in May 2007.

So, will this new stock be a buy? Well, spinoffs generally outperform the market because of one key factor that often makes them undervalued... When parent companies launch a spinoff, shares of the spinoff are distributed to parent company shareholders. Often times these shares are unwanted and immediately sold. This creates a windfall that artificially deflates the stock's price (since there was no change in fundamentals). This makes UPG a stock worth watching as it gets closer to spinning off.

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Nabi Biopharmaceuticals (NDAQ:NABI) is under increasing pressure to expand its contract with Bank of America to include a possible sale of the company. Third Point, an activist hedge fund and majority holder of the company, sent their demands to management today in a 13D/A filing with the SEC. The meeting to decide if this new course of action should be implemented is due to take place on September 15th.

To understand why there is a problem with NABI, we must first look at the past. In their lengthy letter attached to the 13D filing, Third Point elaborated on their history with the company:

"When we first became Ligand shareholders last year our thesis was similar to that driving our Nabi investment: Ligand was an asset-rich company with value substantially above what Wall Street was giving it credit for, but the value of its assets was obscured by poor management and imprudent capital allocation decisions. When we concluded that it was highly unlikely that these values would ever be realized under existing management and Ligand's business plan, and that there was indeed a substantial risk that continued cash burn might eventually force management to sell off the company's valuable assets at fire sale prices, we demanded that Ligand immediately initiate a process to maximize shareholder value. The result is striking: the stock is up by 30% since we became involved; just last week Ligand announced the sales of its two commercial operations at extremely attractive prices; and the company has never been in a stronger financial position, nor had a more exciting future. Due to our direct and substantial involvement in the value maximization process, significant cash should be returned to Ligand's shareholders shortly, and the prospects for the "new" company's remaining R&D pipeline and partnered products is tremendously exciting."

The hedge fund also noted how unresponsive and evasive CEO Tom McLain was in dealing with shareholders. In particular, Third Point had difficulty obtaining access to the company's books needed to complete a valuation of NABI to determine the best course of action. However, the fund noted that they "will not be deterred by the Company's attempts to ignore its shareholders and hide behind legal facades". At the end of the letter, Third Point summed up its argument:

"In sum, it is irrefutable that a majority of your shareholders vehemently oppose the long-term, highly-risky strategic plan that you continue to force upon us against our collective will (while, once again, you undertake very little risk yourselves due to your negligible outright holdings in the stock). You have had six months now to do your research and come to the only accurate conclusion - i.e., if you truly take your fiduciary, legal and moral obligations seriously you will agree to act upon the will of the majority of Nabi shareholders (many of whom have apparently now communicated with you directly) and empower BofA to explore all possibilities to maximize the significant asset values embedded within Nabi. As Mr. McLain has explained to us himself, it is very difficult for a small biotechnology company to succeed in the marketplace today. We agree, and when that company is not strongly capitalized and extremely well managed - Nabi being neither of these - it is nearly impossible. It is time that you finally acknowledge this and, should this prove to be the optimal outcome, place our valuable assets, at a substantial premium, in the hands of stronger operators."

If this proposal goes through, then there is a chance the company could be put up for sale at a substancial premium to its current market price. This makes it a stock definitely worth watching!

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Adams Express Company (NYSE:ADX) took some heat today from shareholders after the release of its proxy filing on September 6th. Karpus Management filed a 13D with the company containing a letter to the Board, which read:

"We have read your recently released preliminary proxy materials and are writing to you to express our dissatisfaction with the inherent shareholder disregard expressed in the materials.

In fact, while reading the preliminary materials, we found many instances where the proposed changes are argued to benefit the company's discretion in the long-run but find absolutely no compelling reason why it would be in shareholders' best interests to relinquish the key accountability measures listed in the proxy materials.

What's more, we can find no indication why it is that the Board is calling this special meeting altogether because in our belief it would have been more efficient and cost effective to have shareholders vote on these issues at the same time that they voted on the routine annual meeting matters back in March.

As an agent of the shareholders, the Board should be reminded that it is afforded the task of monitoring the activities of a Company's officers and/or managers and the overall performance of a Company so that it can enhance shareholder value. Given the circumstances before us, the Board appears to be failing in this task and also seems to forget about its duties to shareholders altogether."

The company is seeking to ammend its company charter in two ways:

• By requiring a larger 2/3 vote in order to convert the company from a closed-end mutual fund to an open-end fund. The difference is that closed-end funds are valued based on the demand for shares of their investment fund while open-end funds are valued based upon the NAV (net asset value) of the stocks that they hold. So, why is there anger over this by shareholders? Well, typically closed-end funds trade at a discount to their NAV (for a variety of reasons), so any conversion to an open-end structure would unlock this value for shareholders.
• By removing the rights of shareholders to ammend the company bylaws. Although the company notes that this technique has never been used on Adams Express, and is only used on rare occasions in the general market (when these provisions exist), it is a tool that activist shareholders could use to advance their own goals.
  

Clearly, it appears as if the company is worried about activist shareholders coming in and converting the fund from a close-end fund to an open-end fund to unlock shareholder value. This stock is worth keeping an eye on because if these provisions do not pass, that opens the door to potential activist shareholders to come in and try to unlock the stock's NAV value.

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Stratos International (NDAQ:STLW) announced today in a press release that the company would be exploring strategic alternatives, which could include a possible sale of the company. The company also said that it had retained CBIC World Markets Corp as its exclusive advisor. The story becomes interesting when we see that activist hedge fund Steel Partners is a majority holder, holding almost 15% of the company.

The company noted in its press release that:

"Steel Partners II, which issued a press release in June indicating that Steel Partners might be willing under some circumstances to make an offer for Stratos, would be welcome to participate in the process."

So, what was this offer? Well, if we look back to their June 13D/A filing with the SEC, we can see the following:

"We believe we have exhausted all our efforts to privately discuss with the Board  of  Directors a value enhancing  transaction in any  meaningful way. Accordingly, Steel  Partners II, L.P. publicly sets forth its willingness to offer to acquire all of the common stock of Stratos it does not  already own, through one of its affiliates or other appropriate  acquisition entity by merger or otherwise, for $7.50 per share in cash (the "Transaction"). Our proposal is not subject to any financing  contingency. This  represents a  substantial  23% premium to the current market price of $6.09 per share. We believe this all-cash offer will provide shareholders immediate liquidity and an immediate opportunity to maximize their investment in the Company. We urge the Board to allow the Company's  shareholders to have the opportunity to decide whether to accept our proposal.

We propose that the Transaction be accomplished through a definitive tender offer/merger agreement. Our proposal is conditioned upon satisfactory completion of due diligence typical for a transaction of this type (our  familiarity  with the Company  should  enable us to complete  all  required  due  diligence on an expedited basis), obtaining all necessary consents and approvals,  waiver of any Company  anti-takeover  provisions  including the Company's  shareholder  rights plan, other customary conditions for a transaction of this type and size and the execution  of a  definitive  agreement.

If as a result of our due diligence we find  evidence of  additional  value inherent in the Company  based on operating  results or  otherwise,  we would be willing to upwardly adjust the offer price to reflect such additional  value. We invite the Board to share with us any  documentation  in the Board's  possession which it believes  reflects  additional  value in the shares that it believes is not already known to us."

The stock is up 10% on the news, now trading at $6.70 - which is still a substancial discount to Steel Partners' offer of at least $7.50 per share. With such a large existing stake in the company, the hedge fund would be acquiring the rest of the company for cheaper than any other potential bidders. Whether or not additional bidders will show up remains to be seen; however, from what we know now, STLW appears to be trading at a steep discount to Steel Parters' June offer, and may be a buying opportunity even at these levels. Either way, it's a great stock to keep an eye on as the process of finding strategic alternatives begins...

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Steel Partners II LP is one of the most well-known activist hedge funds in the market today ran by 40-year-old Warren G. Lichtenstein, founder and principal of the billion dollar hedge fund. Through the years, the fund has built a track record of success through hostile takeovers and proxy battles. Like most activist funds, Steel Partners is simply attempting to give shareholders the money and rights that they deserve by replacing inefficient management and streamlining processes/spending.

In rare talk with Business Week last year, Mr. Lichtenstein offered some insight into his funds purpose and goals. He first noted that he thinks of Steel Partners more as a partnership that hedges itself by "buying cheap" than a stereotypical hedge fund. That is, instead of dealing in trading securities, he prefers to deal in terms of the companies they represent. Steel Partners has typically focused on finding undervalued companies (typically due to bad management) and unlocking that value. This usually involves replacing the Board, firing the responsible persons, and then unlocking the company's potential. Mr. Lichtenstein also told Business Week that he offered something management couldn't: Discipline. He said that his fund is focused on empowering people and held them accountable for their actions - something that corporate management these days struggles with. Finally, he revealed that his future plans are to focus his energy on larger companies with billion dollar market caps, because he finds them less risky despite being "riddled with inefficiencies and excessive costs".

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We first featured IMAX Corporation (NDAQ:IMAX) here back on August 11th when the stock was halved after a string of bad news. Since then, the stock had dropped another dollar or so before settling down in the upper $4 range. However, interest was renewed in today's trading as CNBC's Thomas Ko revealed that he added the stock to his portfolio, citing a potential buyout. Ko made the argument that the stock was at $10 when they were unable to find a buyer in the Board's range (most likely around $15), now it is much more attractive. Currently, the stock is trading in the $5 range - a 50%+ discount from its high a month earlier. Ko believes that many companies, potentially including Walt Disney Co. (NYSE:DIS) and Sony Corp. (NYSE:SNE), might be interested in the company in the $7 area. At this point, a buyout between $7 and $9 would be difficult for the Board to turn down, given the recent SEC investigations and other issues plaguing the company. Moreover, if the Board expressed interest in a sale before this entire ordeal happened, it is perhaps more likely that they would consider any opportunities in their situation now.

This speculation caused the stock price to surge 10% to settle at $5.27 on the day. It is likely that day traders will now be involved in the stock, and may cause significant near-term volatility. Also remember, a buyout is still nothing more than a rumor. However, the company remains cheap at its current levels and we know the Board was (and perhaps still is) interested in a sale of the company. These factors justify at least keeping an eye on the company throughout the next few months as things get clearer.

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Weatherford International Ltd. (NYSE:WFT) revealed today in a Form 4 filing with the SEC that director Robert Moses purchased 53,544 shares on Monday at prices ranging from $39.88 - $39.99. This $2 million purchase follows a rush of other smaller puchases by company officers and directors on September 1st. Weatherford provides equipment and services used for the drilling, completion, and production of oil and natural gas wells in the U.S. Some are speculating that this move relates to the company's earlier announcement of a successful installation of their "Life of Well" system. In that announcement, the company gave an overview of the system:

"Weatherford's Life of Well(TM) optical in-well system is providing both continuous seismic and pressure/temperature monitoring data and is also interfaced to the existing permanent ocean bottom cable system. This allows for the simultaneous collection of permanent seabed and downhole seismic data representing a significant milestone for the industry."

Although a report issued yesterday argued that value investors should wait to invest in oil services companies, investors applauded the insider buying as the price rose 5.45% in mid-day trading today.

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Bloomberg reported this morning that RCN Corp (NDAQ:RCNI) may be considering a possible sale of the company, after it retained Blackstone Group LP as an advisor to the company. The company - which only recently emerged from bankruptcy - moved up 7% on the news. But is there any substance to this deal? If so, how much would the deal be worth?

When many people consider buyout situations, the first thing they look at is the Enterprise Value (EV), which takes into account the company's market cap, debt, minority interest, preferred shares, and cash. This tends to give a more accurate estimate as to the worth of a company because it takes into account both debt and cash - which would have to be acquired with the company. RCN has an EV of $1.07 billion or approximately $28.80 per share, a premium to even today's price. The company also sold some of its assets in the past (seen in this 8K), where its customers were valued at $2,500 each. Using this valuation, we can estimate that their customer base alone (418,000 as of April) is worth about $1.04 billion. Considering the company only has around $205 million in debt, $98 million in cash, plus the potential for a premium, makes the company look attractive as an asset buyout play.

Whether or not the deal will go through depends on a number of factors; however, it is definitely a strong possibility. Any actions taken by the Board to steer the company in this direction can be found in future SEC filings - most likely 8K filings. This stock is definitely a good one to keep an eye on as these events continue to unfold!

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Gold Kist Inc. (NDAQ:GKIS) announced today that it had hired Gleacher Partners LLC to assist it with a review of its strategic plans aimed at maximizing shareholder value. This group will be added to the already lengthy list of advisors, including Merrill Lynch, Alston & Bird. All of this comes as a result of an unsolicited buyout offer from Pilgrim’s Pride Corp (NYSE:PPC) valued at $20 per share in cash on August 21st. More recently, the company also disclosed via a 13G filing with the SEC on August 31st, that Citadel had upped its stake in the company to 6.9%. Note that Citadel is one of the world’s largest hedge funds, with an impressive track record and a bias towards activism.

So, what happens next? Well, considering the bid from Pilgrim's represented a 50%+ premium to the market close (in a market where many of the major players have suffered large losses on the year) many thought that they would take the offer in a heartbeat. However by hiring an additional advisor today, the company hinted that it would not be that simple. Many are speculating that the company may solicit other bids to see if a higher premium can be attained via an auction process. One thing is for certain, however: With a hedge fund like Citadel behind the scenes, it is highly unlikely that the company will reject the idea of a buyout.  

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Goldman Sachs Group, Inc. (NYSE:GS) released another impressive earnings report in an 8K filed with the SEC today. This announcement comes after investors have seen the stock decline by 10% since its record last quarter, just on fears that the company wouldn’t be able to maintain its impressive growth. However, despite a seasonal slowdown in trading revenues, the investment bank still beat the street estimates, earning $3.26 per share against a $2.97 consensus.

Highlights featured in an attached press release included:

• During the third quarter, Goldman Sachs surpassed its previous annual record for net revenues and earnings per common share.
• The firm continued its leadership in investment banking, ranking first in worldwide announced and completed mergers and acquisitions, equity and equity-related offerings and public common stock offerings for the calendar year-to-date. (3)
• Fixed Income, Currency and Commodities (FICC) generated its third highest quarterly net revenues of $2.74 billion.
• Assets under management increased to a record $629 billion, 21% higher than a year ago, including net asset inflows of $30 billion during the quarter.
• Securities Services produced its second best quarterly net revenues of $537 million.
  

So, will this growth continue? Well, the company announced that it would buyback an additional 60 million shares which certainly shows a lot of confidence. Moreover, the 8K also mentioned that the company’s strong backlog remains strong and shows no signs of slowing down. The company has great management that has consistantly shown its ability to outperform. With a share price down 10% on speculation that this quarter would be bad, this may be a good time to pick up some shares after this notion was proven wrong. Other companies to watch include competitors Lehman Brothers (LEH), Bear Stearns (BSC), and Morgan Stanley (MS) - all due to announce their own results over the next week.

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Activist hedge funds play a large role in the modern marketplace - we can hardly go one day without hearing the phrases "strategic alternatives" or "maximize shareholder value" mentioned in 13D filings with the SEC! The sheer number of leveraged buyouts, private equity buyouts, corporate takeovers, proxy battles, restructurings, liquidations and other shareholder-led corporate activity has increased dramatically during the past few years and shows no signs of slowing. As a result, it is becoming increasingly important for individual investors to learn the many players involved with these types of deals in order to know how to react when their portfolio companies are affected by these groups.

The SEC Investor will begin profiling several hedge funds during the coming weeks in order to reveal who exactly is behind each funds, what types of investments they are involved with, and most importantly, where to find information about their investments and objectives within SEC filings. Armed with this information, investors can not only be more secure in their own investments, but also find new opportunities to quickly profit in today's market.

Here is a shortlist of the funds that we will be profiling:

• Appaloosa Management
• Bulldog Investors
• Cannell Capital
• Carlos Slim Helu
• Cevian Capital
• Children's Investment Fund Management
• ESL Partners (Mr. Lampert)
• Harold Simmons
• Icahn, CCI (Mr. Icahn)
  
• Liberation Investment Group
• Pardus Capital Management
• Perry Corp
• Pershing Square Capital Management
• Relational Investors
• Richard Blum
• Schultze Asset Management
• Steel Partners
• Third Point
• Tracinda Corp (Mr. Kerkorian)
• Trian Group

* Note that this list represents a mere fraction of the number of activist hedge funds in existence; however, these are the funds that typically target the largest companies (affecting the most shareholders).

Scottish Re Group Limited (NYSE:SCT) shares jumped over 10% today as the company updated investors on its "strategic alternatives". The company first ran into trouble in July after it blindsided investors with wide losses for the second quarter due to "lower than expected new-business volumes, higher than anticipated retrocession costs and income-tax expense due to the inability to recognize future deferred-tax benefits". This, combined with the resignation of the CEO and various profit warnings, caused the stock to drop over 75%. Since then, the stock has regained some ground after the company confirmed that it would be able to remain solvant. Moreover, the company announced that it would begin the auction process to put itself up for sale in addition to acquiring further financing in order to remain liquid.

Today, the company announced that it had succeeded in both of its goals. Scottish Re announced that it had received proposals from a number of potential bidders last Friday, along with three written proposals for possible financing (between $150 - $250 million). Considering the fact that the stock was trading at $16 shortly before the second quarter earnings were reported and $25 earlier in the year, many investors are speculating that the buyout offers may be significantly higher than the stock's current levels. This is optimism is further driven by SCT's impressive cash flow. Moreover, the fact that there are several bidders opens up the doors to a potential bidding war. So, what's the downside? The company said that it expects its former executives to sell their stock, which includes stock options (that must be exercised within 60 days of their departure) and shares held in their 401k plans. Whether or not they sell remains to be seen. Either way, this stock is a great one to keep an eye on as these events unfold...

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U-Store-It Trust (NYSE:YSI) is an REIT (real estate investment trust) operating in the self storage unit space. The company has recently undergone several changes aimed to help the company recover after falling from $22 in April down to $16 in June. The company announced today in a series of Form 4 filings with the SEC that its CEO Dean Jernigan purchased a total of 195,000 shares (or about $3.9 million) on September 5th and 6th at an average cost of $19.88. Analysts applauded the move with Merrill Lynch's Christopher Pike maintaining his target of $21 saying that they "believe that an operational turnaround is far from fully priced into U-Store-It's stock".

Related Company
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Metropolitan Capital disclosed a 7% stake in Cyberonics Corporation (NDAQ:CYBX) today in a 13D filing with the SEC. The hedge fund also enclosed a lengthy letter stating their intention to nominate three candidates to the company's Board of Directors, with the support of the shareholder group Committee for Concerned Cyberonics Shareholders. In the letter, Metro elaborates on several critical issues facing the company, reasoning that "if there was ever a question about the need for change at Cyberonics, recent events have provided an emphatic answer ... Our nominees will provide a much needed independent voice in the Boardroom, which will represent the start of the process of rebuilding shareholder value." (Read the rest of the letter)

Metro was first involved with Cyberonics six years ago, when Medtronics (NYSE:MDT) offered to buyout the company at $26 per share. Mr. Cummins, the past and current CEO of the company, implored Metro to reject the offer, saying that he would be able to generate more value over the long-term. Metro agreed and the offer fell apart. This turned out to be a bad move as shares have declined over 50% so far this year alone. Meanwhile, Mr. Cummins has profited handsomely from over $17 million in options grants and even more in restricted shares. Even more appaling is the fact that the Board granted Mr. Cummins stock options on the same day as an FDA approval of the company's primary product, which resulted in an overnight gain of over $2 million - not bad for a days work! Despite the CEO's poor performance and questionable ethics, the Board of Directors went so far as to contract Mr. Cummins for an additional five years with the company and institute a 50% pay raise.

Clearly change is needed in this company, and Metropolitan Capital is taking the steps to enforce it. Whether or not they can salvage the company depends on many factors. Even if they successfully obtain the three seats on the Board, the group will likely face a proxy battle to remove Mr. Cummins and also be forced to pay contract termination fees and a plethora of other costs. In the long term, however, this move could help the company turn itself around and provide significant returns to shareholders.

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Autobytel Inc. (NDAQ:ABTL) is an automotive marketing services company that brokers and facilitates the sale of automobiles through the Internet. They own several web portals, provide customer relationship management software and services, and help with data and lead generation services. The company's stock has been slowly declining since 2004 when it reached an all-time high of just under $15. Currently, the stock is trading at just over $3/shares after a 13D filing with the SEC revealed that their largest shareholder - Liberate Technologies - was seeking immediate change to maximize shareholder value

The lengthy letter attached to the 13D filing gave an overview of Liberate's position:

"We are one of Autobytel's largest shareholders. We invested in Autobytel because the company is positioned for significant upside and could become the leading online automotive firm.

However, the company is also at a crossroads. We believe that the company has three strategic choices. First, the company could move immediately to restructure its business, streamline its operations, reform its corporate governance and position itself for future growth. Second, it could engage in a sale process to maximize near-term value for shareholders. Or third, it could continue down the current path, and make no significant tactical or strategic adjustments.

We believe the first path leads to the greatest shareholder value over time and we strongly recommend it. But if the board is unwilling to implement change, then the company should immediately pursue a sale process. The third path will simply be a continuation of the last seven years - a steady destruction of shareholder value."

Shareholders applauded this move as ABTL stock rose 18% in mid-day trading. This level of support is encouraging because it may force management into changes, and also increases the chances of a successful proxy battle, if it came down to that. Although the stock may be a little overpriced in the short-term right now, it is certainly worth keeping an eye on as this story develops.

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Finish Line Inc. (NDAQ:FINL) is a mall-based specialty retailer of athletic, lifestyle and outdoor footwear. Recently their stock has caused some concern among investors after sliding from $18 to below $12 during the past four months. This drop came as a result of lower than expected earnings and sales numbers during the last few quarters. The drop has prompted one of their largest shareholders and activist hedge fund, the Clinton Group, to petition the Board to seek strategic alternatives in a recent 13D filing with the SEC. In a letter attached to the filing, the group said:

"We have invested in Finish Line because we believe the market price of Finish Line shares fails to reflect the true earnings power of the traditional Finish Line concept stores, management's ability to turnaround the recent same store sales trends, the potential for margin improvement and realization of operating leverage and the value potential of the Man Alive and Paiva concepts. Further, we departed our meeting with a greater sense that such beliefs are indeed accurate.

While we are supportive of management as operators of the business, we are writing this letter to encourage your board to take immediate steps to enhance shareholder value. Today, we choose to highlight the following as initial steps that the board should do to enhance shareholder value: (1) eliminate the unfriendly shareholder corporate governance structure including the dual class voting structure, (2) commence a Dutch tender offer in conjunction with a modest senior debt financing, and (3) to the extent the share price continues to languish, engage a reputable investment banking firm to explore strategic alternatives including, but not limited to, a going private transaction or an outright sale of the Company."

Currently, Finish Line is trading at a low 11x earnings (industry 16x) with no debt and a sizable $72 million (or $1.30 per share) in cash which would make them an attractive target to any potential acquirer. The Board's response remains to be seen; however, with the stock up over 8% in early trading today, it is definitely a situation that warrants keeping an eye on.

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A recent S&P 500 research report showed that corporate buybacks have risen to a record $116 billion in the second quarter this year, up 175% in only two years. Put another way, this number is very close to index companies' capital expenditures during the same period! This comes as a byproduct of another trend in corporate America - record amounts of cash in the bank, which has caused many companies to face more and more difficulty justifying the amount of cash they have tucked away. As a result, many investors are demanding that more be done to maximize shareholder value in the form of dividends and share buybacks. This is a good things for investors as it causes less shares to be on the market, which (in theory) increases the stock price.

Here are a few companies that recently announced buybacks:
Pep Boys (NYSE:PBY) - $100 million
Cascade Corporation (NYSE:CAE) - $80 million
Shuffle Master (NDAQ:SHFL) - $30 million
Sunco (NYSE:SUN) - $1 billion
Amazon.com (NDAQ:AMZN) - $500 million

Hewlett-Packard Company (NYSE:HPQ) announced yesterday in an SEC filing that Thomas J. Perkins had suddenly resigned from the Board of Directors. In his mandatory filing with the SEC in the event of a resignation, he expressed concern over the way HP was handling investigations designed to uncover individuals leaking news and trade secrets. This announcement forced HP to reveal its entire investigation, which has been causing controversy on the street. In their 8K filing with the SEC, HP stated their case:

"HP has been the subject of multiple leaks of confidential HP information, including information concerning the internal deliberations of its Board of Directors.  HP believes these leaks date back to at least 2005.  In response to these leaks, outside legal counsel conducted interviews of directors in early 2005 in order to determine the source of the leaks and to obtain each director’s reaffirmation of his or her duty of confidentiality.  The interview process did not yield the source of the leaks.  Notwithstanding these actions, the leaks continued.  As a result, the Chairman of the Board, and ultimately an internal group within HP, working with a licensed outside firm specializing in investigations, conducted investigations into possible sources of the leaks of confidential information at HP.  Those investigations resulted in a finding that Dr. George A. Keyworth II, one of HP’s directors, did, in fact, disclose Board deliberations and other confidential information obtained during Board meetings to the media without authorization.  At a Board meeting on May 18, 2006, after Dr. Keyworth acknowledged that he had leaked confidential information, the Board, after deliberation, asked Dr. Keyworth to resign his position as a director, which he declined to do.  It is at that meeting that Mr. Perkins resigned from the Board after expressing personal frustration with the Chairman of the Board relating to the handling of the matter with the Board.  He stated that he objected to the matter being brought before the full Board and that he believed the Chairman had agreed that he and she would handle the matter privately.  The Chairman disputed Mr. Perkins’ assertion, explaining that she was complying with advice from outside counsel on the appropriate handling of the matter.  At the time, Mr. Perkins confirmed he did not have any disagreement with HP on any matter relating to HP’s operations, policies or practices."

But there was one line which caused so much controversy:

"HP informed Mr. Perkins that no recording or eavesdropping had occurred, but that some form of 'pretexting' for phone record information, a technique used by investigators to obtain information by disguising their identity, had been used."

Apparently, HP had hired an outside investigative firm to obtain the information. Pretexting occurs when someone pretends to be someone else in order to obtain information. For example, to obtain phone records, an investigator may call the phone company pretending to be a customer by giving false credentials and personal information. Although this technically not illegal on a national level, the state of California is investigating whether or not it is a punishable offense under state law. In the end, HP has found at least one of its leakers and they will likely face very little reprecussion as a result of the techniques they used, other than the loss of Mr. Perkins.

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NVE Corp (NDAQ:NVEC) has been experiencing continued volatility recently, nearly retesting its high of $37 after moving up over 12% in mid-day action on huge volume. NVE is most known as the maker of MRAM, which is being heralded as the next generation of Random Access Memory after SRAM and DRAM. Although several other companies (including IBM (NYSE:IBM) and Infiniteon (NDAQ:IFX)) are developing MRAM technologies, NVE is the sole owner of the patent on its so-called "spintronics" methodology. This technique relies on an electron's spin rather than its charge, which makes it many times faster and denser than existing RAM.

So, what's causing this rise? The two predominant rumors on the market are that (1) Freescale Semiconductor (NYSE:FSL) may be infringing upon some of NVE's MRAM-related patents, which may eventually result in licensing deal, and (2) that IBM (NYSE:IBM) may be reconsidering a partnership deal with the company with the announcement of a new storage system. Note that there have been insider acquisitions of stock, but very little insider purchasing - which would further confirm a possible licensing or partnership deal. Any announcements will likely come in the form of an 8K, so watching for that filing along with Form 4's would be a good idea for those interested in following this company.

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Infiniteon (NDAQ:IFX)

Sizeler Property Investors, Inc. (NYSE:SIZ) announced on August 21st that had entered into a merger agreement with Revenue Properties Co. (TO:RPC) in which each share of Sizeler common stock outstanding at the time of the merger will be exchanged for $15.10 in cash. Two days ago, a different company - Compson Holding Corp - announced that it would raise its bid from $15.50 to $16.10. After a day without response from the company, shareholders are calling for the company to at least review the competing bid. Opportunity Investors - a hedge fund holding over 6% of the company - also issued a letter, in a 13D filing with the SEC, to the board, bringing up another key issue: management's relationship with Revenue Properties Co. The concern stems as a result of management's relationship to Revenue Properties Co.:

"As you know, we have significant concerns with respect to how Sizeler handled the auction process for the Company. The conflicts of interests between you, as Chairman of Sizeler, and Revenue Properties Company Limited and Morgaurd Corporation are particularly disturbing. The Compson offer now provides you with the opportunity to put to rest the question of whether or not the process was indeed fair and designed to maximize value for all Sizeler shareholders, not just Revenue Properties."

As a result, the hedge fund demanded that the board consider other options:

"In light of the superior all cash offer proposed by Compson we call on the board to immediately enter into discussions with Compson or any other interested party that may be willing to offer a premium to the current $15.10 per share offer. In addition, given the attractiveness of the Compson proposal, we call on the board to reconsider liquidation as a means to maximize value for all Sizeler shareholders."

This conflict of interest will likely force the board to at least consider the Compson bid, which is more than 6% higher than the current market price. This course of action could result in a bidding war or the abandonment of the sale. Either way, this stock is worth keeping an eye on - with the price sitting at around $15.09, any competing bids would likely come at a substancial premium.

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Acadia Reality Trust (AKR)
Robert's Reality Investors (RPI)
Colonial Property Trust (CLP)

SEC filings are the lifeblood of companies - they contain everything investors need to know to make informed decisions (unless the company illegally witholds the information!). Despite this, many investors ignore these filings and/or fail to realize how they can be used to profit. So, in the interest of creating more informed investors, here's a list of the five most important filings to watch:

1. Schedule 13D & 13G – This filing will let you know when a mutual fund, hedge fund or other entity acquires a 10% stake in a company. Often times when companies are undervalued, activist hedge funds will start acquiring a stake in the company in an effort to convince management to unlock shareholder value through a sale, special dividend, share buyback or other similar measures. Occasionally, these forms can also tip you off to potential acquirers purchasing a large amount of shares before making a tender offer for the remaining shares. Either way, these situations happen when huge shareholders are unhappy and want quick money - which presents great opportunities for those willing to tag along for the ride!
   
2. Form 3 & 4 – This filing is one made by directors, officers and 10% owners of the company. Insider buying – that is, when directors and officers purchase large amounts of shares – often occurs before a positive event for the company. For example, insiders may purchase many shares ahead of a blowout earnings announcement. These filings can also foreshadow other positive events, like potential takeover bids or other favorable events. Insiders know more than everyone else, so following their lead is usually a good idea!
   
3. Form 10-12B – This filing is the one for spin-offs – in particular, it details the spin-off terms and other company details. Spin-offs are very useful to watch because they typically outperform the market in their first year. This often happens because parent company shareholders usually are not interested in the spin-off and therefore dump their shares, which causes the stock to become undervalued. Watching these forms can tip you off to some great opportunities!
4. Form 8K – These filings are extremely important to watch because they detail material current events relating to the company. Whenever there is something worth announcing that cannot be classified in another form – this one is used. These things can include press releases, shareholder letters to management, litigation, SEC investigations, and other similar events. Many opportunities present themselves through these 8Ks!
5. Form 10K – This is the annual report for a company. Now, the numbers aren’t necessarily the most important part; instead, the notes at the end of this document occasionally contains the most interesting material. This can include future forecasts, status on litigation, future company plans or other material similar to that in the 8K. The information found in 10Ks can be extremely useful in coming up with a fair value for a stock!
   

It can be tedious to constantly check for new SEC filings via the SEC's EDGAR service, so I would recommend using a service like SECFilings.com to subscribe to free e-mail alerts when certain filings are made (they also have RSS and other options). You can setup alerts for companies you own, or companies in general, so you can always stay on top of the market!

Sara Lee Corp's (NYSE: SLE) spin-off of Hanesbrands, Inc. (NYSE:HBI) was completed today as the new company begins its first day of trading. Hanesbrands initial 10-12B filing with the SEC provides an overview of the new company:

"Although we are a newly independent company, our product portfolio includes some of the most recognized apparel essentials brands in the United States, including Hanes, Champion, Playtex, Bali, Just My Size, barely there and Wonderbra. We design, manufacture, source and sell a broad range of products such as t-shirts, bras, panties, men’s underwear, kids’ underwear, socks, hosiery, casualwear and activewear. In fiscal 2005, we generated $4.7 billion in net sales and $359.5 million in income from operations. Our mission is to create value for you, our stockholders, and for our customers through effective supply chain management, competitive prices, high quality and service excellence. Our strong brands and dedicated employees will drive this value."

Spin-offs outperform the overall market in most cases. This is because when shares are distributed to parent company shareholders, they often times immediately sell the shares, for a variety of reasons. This creates a windfall that ultimately results in a stock that is below its true value - which is a great buying opportunity for investors. Moreover, this company has a great, recognizable brand name, solid financials, and a great management team. Combined, these factors make HBI a stock worth watching.

Nabi Biopharmaceuticals (NDAQ:NABI) revealed in an amended 13D filing with the SEC today that activist hedge fund Third Point had contacted the company to make several demands. According to the filing, these demands included:

"(1) to investigate and, we believe, confirm that the members of the board of directors of the Company have engaged in gross mismanagement in managing the affairs of the Company, (2) to investigate and, we believe, confirm that such members breached, and are continuing to breach, their fiduciary duties to the Company and its stockholders, (3) to determine whether to conduct a proxy contest to replace the members of the board of directors and (4) to determine whether to commence litigation against such members for breaches of fiduciary duty, among other wrongs. These purposes are reasonably related to the Stockholders' interests as stockholders of the Company."

 These demands stem from years of mismanagement that led to the company's 50% haircut late last year and the continued dismal performance of NABI stock to date. The letter to management (attached to the filing) provides further reasoning behind the demands:

"The Stockholders believe that the board of directors of the Company has grossly mismanaged the affairs of the Company and has engaged, and is engaging, in breaches of fiduciary duty contrary to the interests of stockholders ... the Stockholders believe that the granting of stock options to certain members of management in February 2006 was deliberately and wrongfully timed to maximize the economic benefit to the option grantees and was contrary to the interests of stockholders. In addition, Stockholders believe that the directors have ignored, and are continuing to ignore, the will of the majority of the Company's stockholders, and are embarked on a scheme to entrench themselves in office for as long as possible and to maximize the personal financial benefits to themselves during their remaining tenure at the expense of the Company and its stockholders. The Company's board of directors has paid mere lip service to the interests and wishes of its stockholders, and has refused to engage in substantive dialogue concerning the gross mismanagement over which they have presided."

This is certainly an interesting development as investors are increasingly frustrated with the poor performance of the company. If Third Point can successfully obtain the information they desire it could lead to durastic measures, which could include a proxy battle and/or litigation against the company's management among other things. Either way, this is a great stock to keep on the radar as the situation develops.

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Parlux Fragrances Inc. (NDAQ:PARL) announced in a press release today that it had received a letter from Glenn Nussdorf stating that he had acquired 5% of the company's shares on the open market and seeking authorization to purchase additional shares that may exceed 15% of the company. This transaction is interesting because Mr. Nussdorf owns a majority interest in E Com Ventures, Inc. (NDAQ:ECMV), which is a major Parlux customer. Now, Mr. Nussdorf could have continued to acquire shares without seeking authorization, but this would have prohibited him (or his associates) from doing business with Parlux. By asking the Board to grant him Interested Stockholder Approval as defined in Section 203 of the Delaware General Corporation Law (DGCL) he is opening the door to business transactions, which could include a potential merger or buyout of PARL by E Com Ventures. PARL's Board convened in a special meeting today, which approved the transaction provided that no shares were purchased from Directors. This stock is definitely worth keeping a close eye on as Mr. Nussdorf begins acquiring more shares. Shares are up 12% today on the news.

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Avon Products, Inc. (AVP)
Inter Parfums, Inc. (IPAR)

The Brinks Company (NYSE:BCO) is a security company that has recently found itself in Pirate Capital's crosshairs. In early August, the company acknowledged the receipt of a letter from Pirate requesting that the company put itself up for sale. Mr. Hudson - managing partner of Pirate Capital - contends that a sale of the company would attract "substancial" interest given the Brinks market leadership, and would likely receive offers between $68 and $72 per share. This would represent a 19% to 26% premium over today's price. The Board responded positively on August 9th in an 8K filing with the SEC stating that the Board would take the request into consideration. Pirate has been acquiring the stock since its February 13D filing with the SEC. Interestingly, another activist hedge fund also holds an ownership stake in the company - Steel Partners. These funds hold a combined 15% of the company and are not adverse to forcing changes in large companies.

Brinks is definitely a stock worth keeping an eye on. With such large activist holdings and an asset valuation of around $68 per share, this company is fundamentally undervalued and it has a catalyst the help unlock this value in the short-term.

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McDonalds Corp. (NYSE:MCD) found itself back in activist investor Bill Ackman's crosshairs after the company's move to reduce its holdings in Chipotle Mexican Grill through a stock swap. The company disclosed in an 8-K filing earlier today that Ackman's Pershing Square Capital Management would increase their McDonald's common stock holdings by almost $800 million after the swap.

Last year, Ackman pressured the company to spin off 65% of their owned restaurants in a stock offering, but backed off after McDonalds agreed to $1 billion stock buyback and other measures designed to increase shareholder value. Ackman's fund was also actively involved with Wendy's (NYSE:WEN) restructuring, which included the spin off of their Tim Horton's (NYSE:THI) chain. With these new shares, many investors are speculating that the activist investor will step in again to encourage the company more actively unlock shareholder value.

Whether this materializes or not, when an activist hedge fund discloses an $800 million stake in the company it's something worth watching closely.

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Gateway Inc. (NYSE:GTW) announced today that it would reject John Hui's $450 million bid for the retail operations of the company. Management and the board of directors maintained that the transaction would not be in the best interest of shareholders. Shortly after the announcement the stock moved down 2.5% to settle at $1.95 (where the buyout premium is now at 11%). The company did not address a seperate offer by Hui to potentially acquire all outstanding shares in the company at an unspecified price.

Earlier this year, the company retained Goldman Sachs as a financial advisor to help the company enhance shareholder value. Moreover, a recent 13D filing with the SEC also revealed that Gateway stock has been heavily accumulated by Harbert Management Corp. According to the filing on August 21, 2006, the fund "submitted a letter to the Issuer's Chairman and interim CEO to offer the board and management assistance in their efforts to enhance shareholder value". The filing does not indicate that the hedge fund would seek any extraordinary measures such as the liquidation of the company, sale of the company, or other similar measures.

With the possibility of a future bid for all of the company's shares by Hui, along with the restructuring help of Harbert and Goldman Sachs, Gateway is certainly a company to keep a close eye on as they attempt to improve shareholder value.

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