Hedge Funds Bought Yelp, Dreamworks, and More

Starboard Value, an activist fund managed by Jeffrey Smith, has taken a large position in Calgon Carbon Corporation (NYSE:CCC) and has nominated three members to the Board of Directors. Our analysis is that this is now one of Starboard’s largest stock positions (see more of Starboard’s top stock picks). Even adding back a restructuring charge, Calgon’s operating income in its most recent quarterly report was quite low and earnings multiples are high. We don’t want to blindly follow Smith, and any investors seem to be dependent on Starboard improving value creation, so we think that it is better to watch for further action rather than buying.

Murray Stahl’s Horizon Kinetics (research more stocks Horizon Kinetics owns) increased its stake in Dreamworks Animation Skg Inc (NASDAQ:DWA) to a total of 9.1 million shares, giving the fund ownership of almost 12% of the company. Business at Dreamworks has been down recently though it would be expected that a film studio’s financials would vary dramatically from year to year. 40% of the outstanding shares are held short and when we looked at the company we thought that it may be better to buy peers in the entertainment industry such as Disney (NYSE:DIS). Read more about Dreamworks including its upcoming releases and comparisons to its peers.

Sun Hydraulics Corporation (NASDAQ:SNHY) had Royce & Associates report that it owned 1.8 million shares of the company after buying additional shares. That fund is managed by Chuck Royce (check out more stocks Royce has been buying). While the company had done well in the first half of 2012, revenue and earnings growth turned negative in Q3 and so we are worried that the industrial equipment company may continue to deliver poorer numbers. Sun Hydraulics has earnings multiples of around 20- it does have a considerable amount of cash, but the EV/EBITDA multiple still comes out to 10x- and so we would avoid the stock.

Disclosure: I own no shares of any stocks mentioned in this article.