Scopia Capital Boosts Stake in CONMED, Plus 2 Other Ongoing Activist Battles

According to HFR, hedge fund clients pulled more capital out of the hedge fund industry during the final quarter of 2015 than they invested, marking the first quarter with net capital outflows in four years. According to global database provider eVestment, investors withdrew an additional $19.75 billion out of the hedge fund industry in January, which was the largest “January” outflow since 2009. It is true that some investors are reducing commitments to the smart money industry, but the hedge fund industry is anticipated to keep growing in the years ahead despite delivering a poor performance in recent years. Experienced equity investors usually seek for each piece of information they can get their hands on before investing, while Schedule 13G, 13D, and Form 4 filings usually provide additional information retail investors can use as part of their selection and analysis process. For that reason, this article will discuss three SEC filings submitted by a few hedge funds tracked by Insider Monkey, so let’s take a look at several fresh moves in the hedge fund industry.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

A freshly-amended 13D filing reveals that Bulldog Investors LLC, managed by Phillip Goldstein, Andrew Dakos and Steven Samuels, currently owns 3.93 million shares of Hill International Inc. (NYSE:HIL), which account for 7.60% of the company’s outstanding common stock. Although the fund’s stake has not suffered any changes since the previous 13D filing on the company submitted in mid-March, the most up-to-date 13D is amended to add that Bulldog Investors sent a letter to the company’s independent directors on March 29. The letter recommends the company’s independent directors to “arrange a brief in person or telephonic meeting” that would discuss the ground rules for the upcoming meeting of shareholders to make certain that the meeting is “conducted fairly”. In fact, the letter kindly urges directors to fulfill their duty to “afford Hill’s shareholders a fair opportunity to exercise their franchise right”. Bulldog Investors also reminded the provider of construction consulting services that it lost a lawsuit last year in which an affiliated of Bulldog sued for the right to nominate candidates and present proposals at the company’s annual meeting of shareholders. Let us remind you that Bulldog Investors has been urging the company to explore alternatives to maximize shareholder value, but Hill International’s Board rebuffed the proposal saying that this move was not in the best interest of Hill and its shareholders.

In early May 2015, Hill International Inc. (NYSE:HIL) received an offer of “not less than $5.50 per share” from D.C. Capital Partners, but the company refused the buyout offer. Shares of Hill International are down 11% since the beginning of 2015 and trade at a 60% discount to the $5.50 price tag, so it is quite evident why Bulldog Investors is seeking to make changes to the composition of the company’s Board. Nonetheless, Hill’s management believes that 2015 was a turnaround year in terms of growth and profitability and the company’s financial results prove the truth of their words. Hill International generated total revenue of $720.61 million in 2015, which increased from $641.59 million in 2014. The company also undertook some cost cutting efforts, which reduced overhead costs on an annualized basis by roughly $21.0 million. Net earnings for 2015 totaled $7.74 million, as compared to a net loss of $4.85 million reported for 2014. A total number of 11 hedge funds from our system were bullish on Hill at the end of the December quarter, accumulating nearly 17% of its outstanding shares. Peter Schliemann’s Rutabaga Capital Management reported owning 2.79 million shares of Hill International Inc. (NYSE:HIL) through its 13F filing for the fourth quarter.

The final two pages of this article study two separate SEC filings freshly submitted by two investment firms tracked by Insider Monkey.

In a separate 13D filing, Scopia Capital Management LP, founded by Matt Sirovich and Jeremy Mindich, reported owning 2.38 million shares of CONMED Corporation (NASDAQ:CNMD), which constitute 8.6% of the company’s total number of outstanding shares. This represents an increase from the 2.09 million-share stake disclosed in Scopia’s previous 13D filing on the company, which was submitted with the SEC in early March. Scopia Capital acquired a new position of 1.69 million shares in CONMED at the end of February 2016 and has been gradually piling up more shares.

CONMED Corporation (NASDAQ:CNMD) is medical technology company that offers surgical devices and equipment used by surgeons and physicians in various specialties such as orthopedics, general surgery, gynecology, neurosurgery and gastroenterology. The company’s top-line results have been on a decline in recent years, so have its bottom-line figures. The medical technology company’s 2015 net sales were $719.17 million, which decreased from $740.06 million in 2014 and $762.70 million in 2013. Similarly, CONMED’s net income for 2015 declined to $30.50 million from $32.19 million in 2014 and $35.94 million in 2013. In early January, the company acquired SurgiQuest Inc. for $265 million in cash, a company that develops and commercializes an integrated access management technology for use in laparoscopic and robotic procedures called the AirSeal System. This access system is anticipated to drive up the company’s 2016 top-line figure by $55-to-$60 million. CONMED’s management anticipates 2016 sales in the range of $760-to-$770 million, which reflects constant currency organic sales growth of 1%-to-3%, the revenue contribution from the SurgiQuest acquisition, as well as possible currency impact of $21-to-$23 million. The smart money sentiment towards CONMED declined in the fourth quarter of 2015, with the number of funds invested in the company dropping to 15 from 19 quarter-on-quarter. Let’s not forget to mention that the medical technology company has seen its market value drop 19% in the past year. Jacob Gottlieb’s Visium Asset Management owns a stake of 1.81 million shares in CONMED Corporation (NASDAQ:CNMD) at the end of the December quarter.

In a Proxy Statement filed with the SEC, Willem Mesdag’s Red Mountain Capital Partners LLC urges the shareholders of iRobot Corporation (NASDAQ:IRBT) to support the election of the hedge fund’s two nominees, Mr. Mesdag and Lawrence S. Peiros, at the company’s annual meeting of shareholders that is set to take place in May 2016. Red Mountain Capital currently owns 1.78 million shares of the robotics company, which make up 6.15% of its outstanding common stock. Mr. Mesdag’s hedge fund filed the initial 13D on the company in April 2015, disclosing a 5.1% stake. The filing also included a set of proposals aimed at creating shareholder value, some of which included: focusing solely on its Home Robots business by selling or discarding the Defense and Security business and discontinuing the Remote Presence business; optimizing the capital structure of the Home Robots business; updating the company’s corporate governance policies that would increase board independence and shareholder rights; among others. Moreover, Red Mountain Capital offered a settlement proposal earlier this year, which stipulated the immediate appointment of the two nominees, the increase of the Board size to nine members from eight, and the formation of a capital allocation committee. Apparently, the robotics company refused the proposal and chose to engage in an ongoing and intensifying proxy fight instead. Soon after Red Mountain Capital submitted the aforementioned filing, iRobot Corporation (NASDAQ:IRBT) also submitted a Proxy Statement with the SEC urging shareholders to vote the current slate of directors. The company said that the hedge fund has only suggested actions that the iRobot Board and management team have already undertaken. And iRobot has indeed made clear steps towards implementing some of those proposals, as it recently announced the divestiture of its Defense and Security business unit.

The robotics company derives most of its product revenue from the sale of home cleaning robots, but the company is also manufacturing defense and security robots performing tasks that include battlefield reconnaissance and bomb disposal. Steven Cohen’s Point72 Asset Management acquired a new stake of 325,600 shares in iRobot Corporation (NASDAQ:IRBT) during the December quarter.

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