Tickers in this Article: SRLS, GBL, EPHC, ADPT
Shareholder activism continues to abound in this environment. Ironically, difficult economic times can actually be fertile hunting ground for change prospects. With thousands of publicly traded companies to fish from, there are going to be those that offer opportunity for value creating change. Whether it's a managerial change or simple shift in operating strategy, activists likely won't run out of opportunities. Yet, just because an investor acquires a 5% position in a company does not mean that activism will follow, and if it does, that it will be successful.

IN PICTURES: 5 Tips To Reading The Balance Sheet

Seeking Change
SeraCare Life Sciences
(Nasdaq:SRLS) is the newest activist addition this week. Hedge fund Ltova Holdings, which owns 3,853,263 shares - 20.7% of the total outstanding, making it SeraCare's largest shareholder - is clearly after change at the company. According to a letter issued to SeraCare's management, the hedge fund wants to add new board members "with extensive strategic and operational leadership experience in the biotechnology sector", in order to support the life-science company's "strategic redirection".

SeraCare shares trade for $4 with a market cap of under $80 million and nearly $12 million in net cash on the balance sheet. Unlike many biotechs, the company is profitable and trades for 12-times earnings. With Ltova Holdings seeing change and a significant stake in the company, this will be a good one to follow. (For more, see Could Your Company Be A Target For Activist Investors?)

Passive Stakes Work Too
Gamco Investors (NYSE:GBL), now owns at least a 5% position. Adaptec (Nasdaq:ADPT) provides data security solutions and Gamco owns nearly 6% of the company. The balance sheet is most intriguing. Adaptec currently shows a market cap of over $350 million and a net cash balance of over $388 million. With more cash than the entire market cap of the company, investors may want to dig deeper.

Gamco also added to its position in Epoch Holding (Nasdaq:EPHC), an investment management firm similar to Gamco. According to Gamco's filing, Gamco paid around $6.30 a share for its 1.14 million share stake. Shares today trade for $13, so the value proposition is totally skewed for investors. In both companies, Gamco currently has no intentions of making any changes.

The Bottom Line
Whether active or passive, following situations where investment pros have taken significant positions is a great generator of investment ideas. These firms often have years of investment experience and deep analytical resources not often available to smaller investors. (For more, see Activist Shareholders: A Good Or Bad Thing?)

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

comments powered by Disqus

Trading Center