This Week's Activist Filings

By Sham Gad | September 01, 2011 AAA

The most recent batch of activist filings is anything but boring. Investors frustrated at the lack of opportunities available in today's turbulent markets may want to take a close look, as one big-name company is under target by one big-name businessman.

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Don't Mess With Bill Gates
Of all the names one would consider never to see among activist investors, Microsoft co-founder Bill Gates is one of them. But Gates's investment vehicle Cascade Investments was front and center this past week on the activist front. Cascade now owns nearly 6% of agricultural machinery giant Deere (NYSE:DE) after buying over 7.5 million shares over the past few months, bringing its total holding to 24.5 million shares. Cascade plans to "engage in discussions with Deere" about the company's business strategy. Deere shares have pulled back along with the market and currently trade for $80 or 13 times earnings. Earlier this year, shares reached a 52-week high of $99.80.

Cascade also announced that it now controls over 10%, or 25 million shares, of Ecolab (NYSE:ECL) after having bought another 2.5 million shares last week. Ecolab is a leading provider of cleaning and other products for the hospitality, food service, and healthcare industries. Last week, the company announced that it would be increasing its share buyback program by adding an extra 10 million shares to the buyback authorization. This brings the total buyback authorization to 28 million shares, or over 10% of the shares outstanding.

Unlocking Value
Hedge fund Stadium Capital Management disclosed it is seeking a seat on the board of sporting goods retailer Big 5 Sporting Goods (Nasdaq:BGFV). Stadium owns 15.3% of the outstanding shares. Shares in BGFV are currently trading for $7.50, near the 52-week low of $6.26, or 10 times earnings. Shares currently yield 4%.

JMP Asset Management owns 1,575,000 shares or 8.3% of traffic news provider Global Traffic Network (Nasdaq:GNET). GNET is currently subject to a $14-per-share tender offer. JMP says the offer significantly undervalues the company. On paper, GNET shares trade for 30 times earnings. JPM has not indicated what type of action, if any, it will pursue.

Stocks for Thought
There's never any certainty what degree of value, if any, will be unlocked by activist investors. But with quality names like Deere and seemingly cheap retailers like Big 5 Sporting Goods on the list, some value-creating potential could be lurking in the future. (For additional reading, see Activist Hedge Funds: Follow The Trail To Profit.)

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