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Latest Moves of Carlson Capital, Cannell Capital and Blum Capital Partners

Three hedge funds have recently made changes in their activist stakes in Vitamin Shoppe Inc (NYSE:VSI), TeleCommunication Systems, Inc. (NASDAQ:TSYS), and Career Education Corp. (NASDAQ:CECO), according to filings with the SEC. First off is Clint Carlson‘s Carlson Capital, which acquired about 919,700 shares of Vitamin Shoppe to put the total stake at 1.59 million shares. J. Carlo Cannell‘s Cannell Capital reduced its stake in TeleCommunication Systems to 3.12 million shares. The current holding represents about 5.59% of the company’s outstanding stock. The securities are indirectly owned through the fund’s investment vehicles. Meanwhile, Richard Blum‘s Blum Capital Partners also trimmed its stake in Career Education by 805,000 shares to 3.94 million shares.

Clint Carlson

Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of 6 basis points, though these stocks under-performed the S&P 500 Total Return Index by an average of 7 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). We believe investors will be better off by focusing on small-cap stocks rather than large-cap stocks.

Carlson’s holding in Vitamin Shoppe Inc (NYSE:VSI) represents 5.34% of the company’s outstanding common stock and was acquired through the affiliated six Black Diamond funds and Asgard Investment Corp. The additional stake was purchased for about $32.76 million. The Dallas-based Carlson Capital was founded in 1993 with an investment approach that broadly focuses on profiting from risk arbitrage, convertible arbitrage, distressed/credit arbitrage as well as the traditional long/short strategies. The fund’s strategy is a culmination of Carlson’s years of experience as the head of risk arbitrage for Bass Brothers.

Vitamin Shoppe Inc (NYSE:VSI)’s stock is down by about 11.82% year to date, even though the fall was partially interrupted by a spike in the stock price following news about Carlson’s activism in the company. The $1.28 billion manufacturer of vitamins and nutritional supplements had been engulfed in merger speculations with a much more profitable GNC Holdings Inc (NYSE:GNC), last year. Vitamin Shoppe Inc (NYSE:VSI) investors might think that the merger is back on the cards. However, another reason for Carlson’s investment in the company could be to profit from its low valuation as it is transitioning in accordance with the strategies of its new CEO Colin Watts. According to our database, Ken Griffin’s Citadel Investment Group was the largest stockholder of Vitamin Shoppe Inc (NYSE:VSI), prior to Carlson’s transaction, with about 1.45 million shares valued at $70.62 million at the end of  2014.

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