This Week's Activist Filings

By Sham Gad | May 24, 2012 AAA

Last week the U.S. stock market, as measured by the S&P 500 index, recorded one of its worst weeks in a long time, dropping over 4%. For the month of May, the S&P is off nearly 8%. For many individual stocks, the price decline has been more painful. Indeed, it seems the catchphrase "sell in May and go away" is winning the day.

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Banking Blues
While it may have been a good idea to sell in May, many investing pros have used the volatility to establish new positions or add to existing positions. Bank holding company First California Capital Group (Nasdaq:FCAL) is getting a one-two punch from an investment firm. Basswood Capital Management recently sent a letter to the board of directors of FCAL, expressing disappointment over allegations that First California is "stonewalling" negotiations with suitor PacWest Bancorp

On May 3, PacWest offered $7.25 share for FCAL, 32% premium over the stock price. Today FCAL trades for roughly $6.88. Basswood currently owns 1,527,209 shares, or 5.2% of FCAL. Basswood indicated that it would work to remove the Board of Directors if they continue to snub this deal. At the current share price, FCAL offers around a 5% gain merely if Basswood can succeed in seeing this deal go through. The $7.25 share price represents a slight premium to FCAL's book value per share of $6.90.

SEE: Book Value: How Reliable Is It For Investors?

Discounted Auto Parts
Activist firm Discovery Equity Partners has disclosed a new 5.3% position in US Auto Parts Network (Nasdaq:PRTS), a online retailer of auto parts. Shares trade for about $3.80, valuing US Auto Parts at over $117 million. The company has minimal debt. Discovery feels that the current share price of PRTS does "not adequately reflect the potential value of the company's underlying business and assets."

It will be interesting to see what happens to the share price of PRTS in the near future. Last week, one of the largest brick and mortar auto parts retailers, Advance Auto Parts (NYSE:AAP), reported a weaker than expected quarter and further suggested that business prospects look weak over the next several months. That news was enough to send AAP shares down over 10% and send shares of other auto parts retailers down as well. If shares of PRTS continue to head any lower, that may create a strong catalyst for shareholder activism.

The Bottom Line
Markets have recently become very volatile and that volatility can often send activist investors swooping in to grab shares of attractive businesses. Keeping track of 13D filings is a good idea in the current market environment.

SEE: Digging In To 13D Disclosures

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At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.

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