JCP Investment Pushes for Board Shakeup at Casella Waste Systems Inc. (CWST), Cites Potential for Sale

JCP Investment Management recently filed an amended 13D with the SEC concerning Casella Waste Systems Inc. (NASDAQ:CWST). The investment firm, based in Houston, Texas, disclosed ownership of 5.4% of Casella’s outstanding stock, amounting to just under 2.11 million shares. That represents an increase from the 1.98 million shares reported in a 13D filing one month ago. Along with the filing JCP included an open letter sent to Casella’s board of directors. Among other things, JCP mentioned its desire to have three candidates elected to the company’s board. We believe if JCP succeeds in its activist campaign, Casella shares will outperform the broader indices.

Following activist funds is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. An activist fund can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. We have found through extensive research that the top small-cap picks of hedge funds are also capable of generating high returns and built a system around this premise. In the 32 months since our small-cap strategy was launched it has returned over 144% and beaten the S&P 500 ETF (SPY) by more than 84 percentage points (read more details). Soon, we’ll be releasing a new quarterly newsletter written by former activist hedge fund analyst Michael Bland that tracks ten or so activist campaigns at any given time.

JCP has invested in Casella Waste Systems Inc. (NASDAQ:CWST) since March of 2010. The firm is managed by James Pappas, who has steadily built his reputation as an activist shareholder. Recently he worked with Glenn Welling‘s Engaged Capital on a campaign involving Jamba Inc. (NASDAQ:JMBA) which resulted in both Pappas and Welling being elected to that company’s Board of Directors.

Pappas is also one of JCP’s current nominees for Casella’s Board, along with Brett Frazier and Joseph Swinbank. JCP claims a shake-up of Casella’s Board is needed. It is frustrated with the “chronic underperformance” and the “unwillingness” of the current board to enhance shareholder value. The fund claims multiple potential strategic acquirers have already contacted it expressing interest in Casella, and JCP wants Casella to hire an investment bank to explore these strategic alternatives.