Alexander Seaver‘s Stadium Capital Management is getting more serious about locking horns with Big 5 Sporting Goods Corporation (NASDAQ:BGFV)‘s management, according to an amended Schedule 13D filing submitted by the fund. Stadium Capital is nominating three independent candidates including, Dominic P. DeMarco, a Managing Director and Co-Chief Investment Officer of SCM and an existing member of the Board; Nicholas Donatiello, Jr., a consumer, media and technology strategist and a recognized corporate governance expert; and Michael J. McConnell, an investor and former chief executive officer of consumer-facing businesses with restructuring expertise, to the Big 5’s Board of Directors at the upcoming Annual Stockholder’s meeting in June this year. With 2.51 million shares, Stadium owns 11.4% of the company’s outstanding shares. The latest development comes against a backdrop of earlier tussles between Stadium and Big 5 that started in December last year.
Big 5 Sporting Goods Corporation (NASDAQ:BGFV) has been in SCM’s portfolio since as long as 2006, but the recent spat has its roots in the company’s board not responding to the investor’s demands for improving governance by introducing measures such as holding elections for the company’s board members annually rather than every three years, and also to amend by laws in a way that will allow the majority holder of the company’s outstanding stock to elect the board members. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) responded by forming a “super committee”, which had the entire board’s backing except SCM’s representative, Dominic P. DeMarco. With the new nominations, Stadium is aiming to improve the marks, and hence the valuation, that Big 5 gets at least in terms of corporate governance.
Big 5 Sporting Goods Corporation (NASDAQ:BGFV) slid by nearly 17% during the last year. Besides SCM, Mario Gabelli’s GAMCO Investors is another significant investor in the company with 402,500 shares valued at $5.89 million.
Alexander Medina completed his BA in Economics from Harvard and an MBA from Stanford. He founded his relatively small hedge fund, Stadium Capital Management (SCM) in 1997 and the firm now has offices in Bend, Oregon and New Canaan, Connecticut. SCM also engages in margin trading, hedging and other investment strategies and may also engage in short selling. Towards the end of 2014, the value of the firm’s holdings stood at $398.77 million with 47% of the investments in the consumer discretionary sector and another 45% in industrials. Stadium initiated two new positions during the fourth quarter in Columbia Banking System Inc (NASDAQ:COLB) and Ubiquiti Networks Inc (NASDAQ:UBNT).
While following the activity of hedge funds may give some edge to a retail investor every now and then, depending on the accuracy of his perceptions in the ability of these fund’s to create more value from their activist ventures, but generally following the most popular picks of these firms is not in an investor’s best interest. Our research has uncovered that on average the large cap picks, which also happen to attract most money from these funds don’t perform as well as the small cap companies that these funds choose to invest in. A strategy based on these small cap picks, which we share in our newsletters, beat the S&P 500 ETF (SPY) by a staggering 76.7 percentage points since August 2012 through March 2015 and returned 132%.
SCM purchased some 957,900 shares of Columbia Banking System Inc (NASDAQ:COLB) valued at $26.45 million during the fourth quarter. Among over 700 hedge funds that we track, the interest in the bank holding company grew as 14 funds had an aggregate investment of $173 million in the company versus 11 funds with $105.78 million a quarter earlier. Mark Lee’s Forest Hill Capital held some 1.55 million shares valued at $42.93 million towards the end of 2014.
Columbia Banking System Inc (NASDAQ:COLB)’s stock price is nearly flat over the last year. This compares well with the commercial bank industry which is down about 2% during the same period. Columbia’s fourth quarter financial results included an EPS of $0.44, which was $0.02 above the estimates and revenues of $93.95 million which came in $3.62 million lighter than expected.
Ubiquiti Networks Inc (NASDAQ:UBNT)‘s contribution to SCM’s portfolio on the other hand, was much smaller and stood at 0.93%, as the fund purchased about 125,600 shares valued at $3.72 million. Another fund holding a considerable stake in the developer of high performance networking technology for service providers and enterprises was Charles Akre’s Akre Capital Management with 1.85 million shares valued at $54.83 million.
Ubiquiti Networks Inc (NASDAQ:UBNT) has appreciated by about 4.5% over the last 52 weeks. Ubiquiti’s reliance on the “new age of transparency” according to its CEO Robert Pera means that the company spends much less in advertising and commercials than its competitors and relies on customers spreading their feedback and opinion over social media websites. Ubiquiti Networks Inc (NASDAQ:UBNT)’s EPS of $0.53 for the second fiscal quarter was $0.05 higher than the estimated while revenues of $153.1 million also came in $2.65 million higher than anticipated.
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