Three Stocks with Tremendous Upside from Activist Investors: Hess Corp.(HES), Navistar International Corp (NAV), Famous Dave’s of America, Inc. (DAVE)

Page 1 of 2

How is the mindset of a billionaire different from a Motley Fool reader? You might be surprised to learn that it’s not that different, actually.

T. Boone Pickens recently published an op-ed piece on LinkedIn Today called A Fool and His Money are Soon Parted. The first sentence of the piece reads, “Don’t think that just because I’m a billionaire I throw money away.”

I’ve personally seen T. Boone make investments as small as $500,000 (readers may question this, but I actually have). When you consider a half million dollars in relation to his net worth, it’s similar to any of us making a small trade in our retail brokerage account.

Hess Corp. (NYSE:HES)T. Boone Pickens isn’t the only billionaire who exercises discipline with his money. Consider the case of Carl Icahn and his large investment in Herbalife Ltd. (NYSE:HLF). I recently wrote how Icahn prudently accumulated his Herbalife shares in the mid $20-range and $30-range. We can confirm that Mr. Icahn hasn’t purchased any shares above $40 through his regulatory filings, yet retail investors have piled in at significantly higher prices than Icahn paid himself.

The purpose of these illustrations isn’t because I have a preference for T. Boone Pickens or Carl Icahn with Herbalife (in fact, I actually agree with Ackman).  The lesson here is simple–despite their tremendous wealth, most of the large investors in the stock market continue to make the most money because they follow a strict set of rules. While T. Boone and Icahn have made countless investments over the years, these sharks continue to prowl the seas of the stock market.

I believe Motley Fool readers can participate in the upside by swimming with the sharks. Here are three stocks that are currently being stirred by activist investors.

Famous Dave’s of America, Inc. (NASDAQ:DAVE)

Famous Dave’s of America, Inc. (NASDAQ:DAVE) is a full sit-down restaurant that specializes in barbequed meats and chicken, including beans, corn muffins and sauces. The company owns 53 locations and franchises an additional 134 restaurants in 34 states and 1 Canadian province.

On Feb. 13, Dave’s reported fourth quarter revenue of $36.3 million, which was less than the expected $37.3 million. Comparable restaurant sales for October – December decreased 6.0% for company-owned restaurants and 4.0% on franchised restaurants.

A quick lesson on same-store sales. During my work as an equity research analyst, I evidenced that franchised restaurants consistently performed better than company-owned restaurants. The reason is simple: franchisees have more skin in the game. Therefore, it doesn’t surprise me that Dave’s franchised restaurants outperformed the company-owned by a full 2.00%.

The weak performance at Famous Dave’s of America, Inc. (NASDAQ:DAVE) presents a prime opportunity for an activist investor. Patrick Walsh, a Chicago-based wealth manager, recently purchased 9.9% of Famous Dave’s, which has a market capitalization of $77 million.

On March 4, Famous Dave’s of America, Inc. (NASDAQ:DAVE) disclosed with the SEC that it agreed to add Patrick Walsh to the company’s board of directors.  In addition to having a new board member, Famous Dave’s announced back in December it was re-aligning its core marketing functions.

I recommend buying shares on this collective news.

Hess Corp. (NYSE:HES).

Hess is a $24 billion global energy company that operates in two segments: Exploration & Production (E&P) and Marketing and Refining (M&R).

On March 4, Hess announced in a press release the company’s formal plans to transform into solely an exploration and production business and exit the downstream businesses of retail, energy marketing, and energy trading.

While John Hess, Chairman and CEO, told news outlets that the changes were prompted by internal review, numerous analysts believe that activist investors such as Paul Singer’s Elliot Management prompted the news.

Mr. Singer recently stated that the company is “doing the least possible to maintain the status quo.” I believe we will see more to come from Hess Corp.(NYSE:HES). management as shareholders prod behind the scenes.

Following the series of announcements, multiple firms on Wall Street have raised their price targets on Hess. French investment firm Societe Generale upgraded Hess to Buy from Hold with an $80 price target. New York-based ISI Group also upgraded the stock to Buy with a $77 price target.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!