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Jamba, Inc. (JMBA), Medifast Inc (MED), TriMas Corp (TRS): Activist Glenn Welling’s Favorite Picks

In a new filing with the Securities and Exchange Commission, Glenn W. Welling‘s Engaged Capital disclosed raising its stake in Jamba, Inc. (NASDAQ:JMBA) and entering into a stock puchase plan with Mutual Securities, Inc. (MSI). According to the filing, Engaged owns over 1.58 million shares of the company, up from 1.43 million shares held earlier. Following the increase, the activist stake amasses 9.1% of Jamba’s outstanding common stock, versus 8.2% disclosed in a previous filing. Under the terms of the stock purchase plan, MSI will acquire on behalf on Engaged Capital up to around 1.01 million shares of Jamba until May 2016. The plan may be terminated by the fund or it will terminate in case of some special events such as the bankruptcy or insolvency of the company or the acquisition of the company.

Jamba, Inc. (NASDAQ:JMBA)

Engaged Capital’s latest move regarding Jamba, Inc. (NASDAQ:JMBA) preceeds a settlement agreement signed between the investor and the company in January. Under the terms of the agreement, Jamba agreed to appoint Mr. Welling and James C. Papas, a managing member of JCP Investment Management, to its board of directors.

Jamba, Inc. (NASDAQ:JMBA) is a $262.5 million holding company that promotes a healthy and active lifestyle and that operates and franchises Jamba Juice stores, through its subsidiary Jamba Juice Company. Last week, the company released its financial results for the fourth-quarter which showed a loss of $8.0 million, or $0.47 per share, versus a loss of $5.7 million or $0.33 per share a year ago. Even though the company’s net loss widened in year-over-year terms, it still was better than expected. Among the funds that we track, Glenn J. Krevlin‘s Glenhill Advisors is the second-largest shareholder of Jamba, although its stake that consists of 614,000 shares, valued at $9.23 million, amasses only 0.70% of the equity portfolio.

Mr. Welling is an activist investor that manages roughly $122.52 million in an equity portfolio that primarily consists of Services and Technologies stocks. In the majority of companies in which Mr. Welling acquired stakes, he went activist and tried to push for changes that would unlock shareholder value. Last week, the investor initiated a proxy fight against Rovi Corporation (NASDAQ:ROVI), after unsuccessful discussions regarding the company’s strategy and other issues. Therefore, Engaged Capital said in a letter disclosed last week that it had nominated four directors to be elected to the company’s board. Digital television guide provider Rovi hired an adviser to help it fight Engaged Capital, which, according to the company’s claims, tries to seize control of the company. Aside from Jamba, Inc. (NASDAQ:JMBA) and Rovi Corporation, Engaged is also currently pursuing activist campaigns in two other companies: Medifast Inc (NYSE:MED) and TriMas Corp (NASDAQ:TRS), which represent the fund’s second and third-largest holding respectively. The fund also held 4.14 million shares of Silicon Image at the end of 2014, the position being the largest in the fund’s equity portfolio, but the company was acquired by Lattice Semiconductor earlier this year.

Tracking the activity of activist investors might help in picking the right stocks to beat the market. Over the years, activist investing became very popular and has a high resonance as investors launching activist campaigns have established a solid track record of increasing shareholder value at different companies. Another strategy that could help retail investors obtain higher returns by following hedge fund activity is the one that we have developed at Insider Monkey. We determined that by immitating 15 most popular small-cap picks among hedge funds, an investor can beat the market by 1 percentage point per month. Our small-cap strategy returned 132% between August 2012 and March 2015, beating the market by around 79 percentage points.

Engaged held a611,600 shares of Medifast Inc (NYSE:MED) at the end of 2014, the value of the stake amounting to $20.52 million. The investor initiated a stake during the first quarter of last year and in May went activist stating that the company was undervalued at traded at a 40% discount relative to its peers, among which are Weight Watchers International, Inc. (NYSE:WTW) and NutriSystem Inc. (NASDAQ:NTRI). The investor also stated that Medifast Inc (NYSE:MED) would become a takeover target if the markets wouldn’t be able to recognize the company’s intrinsic value. The stock appreciated only by 2% since Engaged went activist. The largest shareholder of Medifast Inc (NYSE:MED) among the funds that we track is Jacob Gottlieb‘s Visium Asset Management, which owns 1.35 million shares. However, Visium’s $45.29 million stake in the company amasses only 0.63% of the equity portfolio, versus Engaged’s position that represents 16.74%.

TriMas Corp (NASDAQ:TRS) is next in line, with Engaged disclosing a $14.13 million stake that contains 451,500 shares. At the end of February, the fund settled with TriMas Corp (NASDAQ:TRS), which agreed to appoint Herbert K. Parker, former chief financial officer and current executive vice president, Operational Excellence at Harman International, to its board of directors. In addition, under the terms of the mutual cooperation agreement with Engaged, TriMas Corp (NASDAQ:TRS) also agreed to appoint Mr. Welling to its board at the investor’s request in 2016. In exchange, Engage agreed to support the company’s slate of candidates at the company’s 2015 Annual Meeting and some other standstill provisions. The investor added the company to its equity portfolio during the third quarter of 2014, initially holding 374,900 shares. Meanwhile, since the end of September, the stock of the manufacturer of engineered and applied products gained around 18%. Among the funds that we track, Dan Friedberg‘s Sagard Capital Partners Management Corp is the largest shareholder of TriMas Corp (NASDAQ:TRS), holding 1.17 million shares, up by 100% on the quarter.

Disclosure: none