An interesting slice of corporate America found itself being pursued by activist interests this week. A diverse selection of businesses found themselves in the spotlight. In addition, some companies had major shareholders reduce positions which could also have its own set of implications.
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Private equity group Leonard Green and Partners is working to unlock potential value at BJ's Wholesale Club (NYSE:BJ). The firm controls 9.3% of BJ's shares outstanding. Recently, the private equity firm announced it had entered into a confidentially agreement with BJ's. This agreement follows news that BJ's was putting itself up for sale. Investors should note that Leonard Green had a very successful effort with its investment in Whole Foods (Nasdaq:WFMI) during the height of the recession. Around the time shares in Whole Foods were trading as low as $7 per share. Today, shares in WFMI trade for over $60. Shares in BJ's trade for $49, approximately 27 times earnings, and near the 52-week high of $50. Much larger rival Costco (Nasdaq:COST) currently trades for 23 times earnings, respectively. (For more, see BJ's Results Overshadowed By Possible Sale.)
Thanks to a buoyant market where many shares trade at 52-week highs, many investors are cashing in. One spotlight company, Red Robin Gourmet Burgers (Nasdaq:RRGB), saw one of its largest collective shareholders, Spotlight Advisors and the Clinton Group reduce its position to 4% by selling nearly 190,000 shares of a roughly 800,000 share stake. Red Robin, coming off a decent quarterly announcement, has seen its shares rally by over 30% in the past few months. Icahn Associates is starting to unload its huge position in natural gas Chesapeake Energy (NYSE:CHK) after selling 11.4 million shares for $38.41 per share. Icahn now holds 27.2 million shares.
Buying or selling by an investor or insider with a large stake is clearly valuable information to be aware of when researching companies. But that activity should not come in the way of making decisions based on one's own research and analysis. (For more, see Activist Hedge Funds: Follow The Trail To Profit.)
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