• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / U.S. Equity

Activist-Inspired Ideas

Let them guide you to investment opportunities.
By SHAM GAD Dec 19, 2013 | 05:00 PM EST
Stocks 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.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Gad had no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity

More from U.S. Equity

The 10 Personality Traits of Successful Traders and Investors

James "Rev Shark" DePorre
Jun 25, 2022 10:00 AM EDT

Superior market players share these characteristics in their emotional makeup.

The Best House in This Neighborhood Is on Sale

Brad Ginesin
Jun 24, 2022 12:15 PM EDT

The buying opportunity here below book value is compelling.

Here's What We Need to See to Be Convinced the Market Has Turned

Guy Ortmann
Jun 24, 2022 10:28 AM EDT

The 'crowd' remains at historically levels of fear.

A Stock That Lets You Sleep Well at Night

Paul Price
Jun 24, 2022 7:00 AM EDT

This conservative, high-yielding stock has very tempting upside potential.

Will This Year's Energy and Commodity Trades Become Last Year's Tumbling Tech?

Helene Meisler
Jun 24, 2022 6:00 AM EDT

I can't remember the last time anyone asked me about Apple. No one cares.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:10 AM EDT PAUL PRICE

    More Insider Buying in American Woodmark (AMWD)

    American Woodmark , which I've discussed here fr...
  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • 12:08 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10

    As a Portfolio Name Agrees to a Merger, Here's Our...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

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

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.

FactSet 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.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login