Activist-Inspired Ideas

 | Dec 19, 2013 | 5:00 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

sup

,

bbrg

,

msft

,

fnma

,

fmcc

There's a saying that in any market, bull or bear, an astute stock-picker can do well. In any market there are presumably companies that remain unloved or undermanaged that create attractive investment opportunities. Some of the best opportunities are businesses where activist investors or large shareholders have come in and directly implemented positive changes.

A very interesting opportunity is found in Superior Industries (SUP), a $532 million maker and supplier of aluminum wheels to automakers. GAMCO Investors, a 13% shareholder, wants the board to adopt a proposal to authorize a tender offer to buy at least $40 million worth of shares. Superior has $186 million in cash and GAMCO notes that $76 million is available to distribute to shareholders without adding additional leverage to the balance sheet. If you do the math, the $76 million represents 15% of the company's current market cap.

Another interesting name is Bravo Brio Restaurant Group (BBRG) a casual dining chain consisting of 104 restaurants under three difference concepts. BBRG has a market cap of $313 million, no net debt and trades at 18x forward earnings. Discovery Equity Partners recently built a 5.2% stake but hasn't announced any plans or proposals. Looking at Bravo's cash flow statement, the company is generating more than $50 million in operating cash flow, less than 6x current enterprise value. Capital expenditure is currently around $35 million a year, suggesting an opportunity to generate significant free cash flow if capex is reduced.

Microsoft (MSFT) continues to be a very intriguing bet given its size and stability, and a 3.1% dividend is not bad considering Fed Chairman Ben Bernanke's statement Wednesday that low rates are here for a long time. The company is taking its time to find the right CEO, a prudent move in my view. Microsoft is a $45 to $50 stock based on its cash generation alone, especially if the company continues to ramp up its dividend and buyback.

Fannie Mae (FNMA) and Freddie Mac (FMCC) are two more names to keep an eye on. They are being pursued in the activist sense and two high-profile investors, Fairholme Capitol's Bruce Berkowitz and Pershing Square's Bill Ackman, should not be ignored. Both have very successful records in financial turnaround investments.

Activists are very granular stock-pickers who seek specific changes in a company to effect value. They operate irrespective of market valuation and instead take a bottoms-up approach at a company-specific level. Use activist ideas as a platform for investment opportunities in today's market.

Columnist Conversations

There were nice reversal-type candles on the weekly charts of the major indices. The DOW and the S&P forme...
A number of stocks on my watch lists are attempting to form positive candles a key support levels. I noted th...
Lang:
While last week was a day to pull the plug and contemplate where the market was headed, I waited for some conf...
Shares of TSLA have formed multiple hammer candles at a key level of support defined by: the September head an...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.