The market volatility of the past several weeks has been painful to many businesses. Investors have taken notice, and they've used the price declines to jump in and take positions in hopes of adding value, and in the process, seeing the value of their investments soar. (To learn more about value investing, check out The Value Investor's Handbook.)
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A Bottoms-Up Play
Central European Distribution (Nasdaq:CEDC) is one of the leading distributors of vodka and other spirits in Poland and Russia. A little over a year ago, shares were trading for $28; today they sit at $6.50. Thanks to a perfect storm of higher costs, lower volumes and other headwinds, operations have been hurt. Beverage investors and Russian liquor industry veteran Mark Kaufman recently disclosed ownership of 6.9 million shares, or 9.6% after buying 6.8 million shares, at prices ranging from $5.31 to $10. Last week, Kaufman wrote to the company's board expressing his interest in contributing "ideas and skills" to help CEDC maximize its value. Kaufman was part of Russian alcohol company Whitehall Group, which was bought by CEDC back in March. As part of the sale, Kaufman received about 100,000 shares. His aggressive buying of CEDC stock after he sold them a business suggests that Kaufman sees tremendous potential for the company.
More of a Good Thing
Other activist investors were adding on the position, a positive sign of commitment. Discovery Equity increased by over 50% its stake in Online Resources (Nasdaq:ORCC). ORCC provides internet-based payment systems to small businesses in the U.S. Discovery Equity didn't stop there; it added to its equity stake in medical device company Cardiovascular Systems (Nasdaq:CSII). CSII is a $230 million maker of minimally invasive treatment options for vascular diseases.
Successful activist hedge fund Third Point Capital plans to take the management of Yahoo! (Nasdaq:YHOO) to task at the next annual meeting. Third Point owns 5.2% of Yahoo! shares at an average cost of $12.73 a share. Third Point wants to shuffle the Yahoo! board after the recent dismissal of CEO Carol Bartz. Yahoo! shares currently trade at $14.61 or 1.5 times book value and 17 times earnings.
The Bottom Line
Today's investment landscape is tough in a market without any sense of direction. Active investors are usually in it for the long road and can often achieve success regardless of market direction. (To see if active management fits your investment needs, read Active Management: Is It Working For You?)
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