The most recent look at activist filings for the week produced a thin list, which may have been a result of the arrival of the holiday season. However, with markets sitting at a two-year high, valuations could likely be creating slim pickings in activist land.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

Looking for Change
Hedge fund MMI Investments is taking a very active role in the affairs of EMS Technologies (Nasdaq:ELMG), of which it owns a 7.7% stake. EMS is a $300 million designer and manufacturer of wireless communication products for industries such as defense, aviation and other commercial interests. Shares trade for $20 but MMI feels the company is deeply undervalued. In a letter MMI wrote to management, they argue that "despite poor financial and stock price performance...[EMS] remains a highly valuable franchise with assets that should be monetized through a sale of the company at a value substantially higher than its present stock price."

MMI has pursued any further active roles at this point. It's possible that if the stock remains a laggard and management doesn't act to effect change, the fund will pursue other channels such as seeking board representation. I think its safe to say that based on MMI's conviction of where the shares should be trading in relation to today's share price, MMI won't sit still. (For more, see Activist Hedge Funds: Follow The Trail To Profit.)

A Concentrated Bet
Avista Capital Partners recently reported that it has increased its stake in energy services company Geokinetics (NYSE:GOK) and now owns over 38% of the company. In addition, Geo-Services of Norway disclosed ownership of 15% of Geokinetics, leaving over 50% of the company in the hands of two investment groups. No details of plans were given by either of these groups. Currently, Geokinetics seems to be busy fending off its debt issues as the company's debt is more than twice its current market cap. Just as recently as December 14, the company announced a waiver to its financial covenants and an amendment to its revolving credit facility. Clearly the company is under tight watch with respect to its finances.

Value investor Mario Gabelli Gamco Investors continued to increase its ownership in both Cincinnati Bell (NYSE:CBB) and Baldor Electric (NYSE:BEZ). Gamco now owns 8.3% of CBB paying around $2.50 for its most recent purchases. Cincinnati Bell recently announced that it is being added to the S&P 600 SmallCap index. Gamco is better known for its hands-off approach and sticking to buying stakes in companies it feels offer value, so these two names may be worth a closer look. (For more, see This Week's Activist Filings)

The Bottom Line
With valuations becoming less and less attractive, it appears that temporarily impaired or distressed companies are showing up more in 13D filings. Those situations may not be the best plays for individual investors unless you have a long window of time at your disposal and can handle the volatility as well as a risk of an unsuccessful outcome. (For more, see Hedge Funds: Strategies.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  2. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  3. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  6. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  7. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  8. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  9. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  10. Investing

    A Look at 6 Leading Female Value Investors

    In an industry still largely predominated by men, we look at 6 leading female value investors working today.
  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!