Sandell Asset Management, led by Tom Sandell, recently filed its latest 13F with the U.S. Securities and Exchange Commission. Founded in 1998, Sandell specializes in international, event-driven, multi-strategy investing, having a strong focus on equity special situations and credit opportunities. The value of the fund’s public equity portfolio totaled $1.02 billion as of March 31. During the quarter, the investor acquired stakes in over ten companies, while it sold out of positions in 12. In this article we’ll take a look at the top three small-cap picks of Sandell, including Bob Evans Farms Inc (NASDAQ:BOBE), La Quinta Holdings Inc (NYSE:LQ), and JDS Uniphase Corp (NASDAQ:JDSU).
We track more than 700 hedge funds and investors in our database with a keen eye towards their small-cap stock picks. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). Since the official launch of our small-cap strategy in August 2012 it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points.
First, we will discuss Bob Evans Farms Inc (NASDAQ:BOBE), in which Sandell increased his position by 17% to 1.63 million shares during the first quarter, the stake being valued at $75.60 million. Bob Evans Farms Inc (NASDAQ:BOBE) is a restaurant and food products company with a market cap of $1.07 billion. At the end of April, Bob Evans Farms Inc (NASDAQ:BOBE) announced that it plans to close 20 restaurants over the next 12 months. This action is likely to improve the company’s annual operating income by about $2.5 to $3.0 million. For the first quarter of 2015, Bob Evans Farms Inc (NASDAQ:BOBE) posted net income of $5.9 million, or $0.25 per share, versus $6.2 million, or $0.24 per share, in the same period last year. The company’s stock declined by more than 12% year-to-date. Sandell added Bob Evans Farms Inc (NASDAQ:BOBE) to its equity portfolio during the second quarter of 2013 and pushed the company to pursue a sale or spin-off of its BEF Foods business segment, but this proposal was later rejected by the company’s board of directors. Other large investors of the company include Rob Citrone’s Discovery Capital Management and Chuck Royce’s Royce & Associates.