What activists have been doing: Corvex Management, Trian Partners and more

THINGS HAVE GOTTEN off to a bang so far this year in terms of activist investing. This edition of our Activist Investor Newsletter is a little long-winded as we try to fit a lot of action into just one email — so bear with us.

As far as whether 2015 will be the year of the activist — it’s tough to tell — but it certainly looks like 2015 with be an even bigger year than 2014. There’s a lot of money flowing into activist hedge funds, allowing activist investors to run multiple campaigns at the same time. We also have the rise of several new activist funds.

- The top new activist campaigns -

CORVEX MANAGEMENT IS going after American Realty Capital Properties ($ARCP). Among special situation investors, this is one of the hottest topics right now. A lot of retail investors got burned when shares of ARCP fell by as much as 40% after an accounting scandal came to light. But Corvex is to the rescue. It has a cost basis of under $9.00/share and the fund owns 7.1% of the REIT via stock and options.

ARCP has a management and accounting issue, but it has a portfolio of durable/hard assets. Corvex will have a key role in finding a new CEO for ARCP. Recall, Corvex installed famed real estate mogul Sam Zell at CommonWealth REIT after an activist fight with that REIT last year. Further reading: Corvex Management Takes Activist Aim At American Realty Capital Properties ($ARCP)

FRONTFOUR TOOK A 5.8% stake in OM Group ($OMG), sending a letter to the company to nominate three directors. It wants a share buyback and cost cuts.

RAGING CAPITAL HAS has gone activist on AM Castle ($CAS), owning 14.5% of the company. Its cost basis is between $7.00 and $7.50 a share, with the stock trading at $6/share currently. It plans to nominate one or more directors.

- Other notable activist happenings -

Starboard Value got a win over at ($MWV) when the company announced it was spinning off its chemicals business. Starboard took an activist stake back in May, owning 6.1% of the company. Its cost basis is $39/share, with the stock currently trading around $45.

Starboard Value sent a letter to Yahoo ($YHOO), calling for a cease on any future acquisitions, unless the target company is AOL ($AOL). But the real takeaway from the letter is that YHOO needs to focus on a tax efficient way to separate its non-core investments (think: Alibaba and Yahoo Japan). Look for a piece from us on this later this week.

Cumberland Associates sent a letter to Forestar Group ($FOR) about the stock’s underperformance. It wants the company to boost shareholder value, namely with a better strategy for capital allocation and corporate governance. Cumberland (a company formed by SpringOwl and Cove Street) owns 6% of the company. Again, we’re putting together our thoughts on this.

ValueAct Capital was also in the letter sending mood last week; forwarding a letter to MSCI ($MSCI), noting that it wasn’t happy with MSCI’s rejection of ValueAct’s request for a board seat. ValueAct owns 8.3% of the company. More thoughts to come on our blog about this.

Trian Partners has waged a proxy battle at DuPont ($DD). The activist fund has nominated four board members, including Trian founder Nelson Peltz. Further reading: Activist Investor Nelson Peltz Takes His DuPont ($DD) Battle To The Board Room

MSD Capital (Michael Dell’s personal investment company), which owns 7.5% of Asbury Automotive ($ABG), got two directors put on the company’s board.

- Activists shaking up their stakes -

(+) Blue Harbour boosted its stake in Investors Bancorp to 7.4% of the bank holding company. Blue Harbour has a cost basis of $10.45/share — versus the current $10.77 stock price. Further reading: Blue Harbour Is Bringing Sexy Back At Investors Bancorp ($ISBC)

(+) PW Partners added to its Town Sports International Holdings ($CLUB) position. It’s a small increase — just around 10% — but the activist now owns 2.5M share, putting it as a 10.3% owner of the gym operator.

(-) Fir Tree has cut its stake in Noble Corp. ($NE) by 60% since 3Q 2014. Its most recent sale reduced its ownership to just 2.4% of the company. More thoughts from us to come on this name.

(-) ValueAct Capital dumped some 30% of its Rockwell Collins ($COL) stake, now owning 4.2% of the company.

(-) Magnolia Capital dumped over 60% of its stake in Atlas Financial ($AFH). It now owns just 3.6% of the company.

(-) Baker Bros. cuts its Xoma ($XOMA) stake by nearly 10%, putting its ownership to 18.1%.

- Top links from stockpucker this week -

The Baupost Group founder, Seth Klarman

Russia isn’t for everyone. As Seth Klarman says (not specifically about Russia, but it fits): One, you have to be much more conservative in your assumptions and demand a much larger margin of safety. Or two: you simply don’t get involved at all — Russian Energy Thoughts

Rosetta Stone has a worthless board; it needs to be bigger and more diverse. More specifically, Rosetta needs more digital and customer experience members. A proxy battle on the board looks to be almost a certainty at this point — Two Activist Investors And A Language Learning Disaster

Auto sales have already started hitting a ceiling, with North American car sales returning to pre-recession levels last year. The downturn in auto sales during the financial crisis already forced auto dealers to turn to optimizing their systems, and those that didn’t, have been doing it over the last year — Why This New Spinoff Has Two Activist Investors

And given the level of NOLs, insiders will be restricted from selling, ultimately helping aligning insiders with long-term shareholders. With such a small portion of shares being floated, Green Brick is very much like a private company — An Overlooked David Einhorn Deal

AND IN CASE you missed our last activist update, here’s theHoliday Activist Wrap Up.

ALSO CHECK OUT the hottest activist news from around the web this week.

IF YOU HAVE any questions or feedback, including questions about certain activist campaigns email us at stockpucker@gmail.com.

Originally published at stockpucker.com on January 15, 2015.

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