In a new filing with the Securities and Exchange Commission, AOF Management, founded by Joe Pretlow and Ben Terk, disclosed its ownership of 3.90 million shares of Cinedigm Corp (NASDAQ:CIDM), which represent 5.2% of the company’s outstanding common stock. The stake is activist by nature and AOF Management considers that Cinedigm is undervalued and it might engage in discussions with other parties regarding value-enhancing opportunities at Cinedigm.
We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 and these stocks beat the market by 84 percentage points (135% return vs. S&P 500’s 55% gain) over the last 33 months (see more details here).
AOF Management is a deep value, event-driven, long-short hedge fund firm founded by Joe Pretlow and Ben Terk in November 2009. Joe Pretlow, one of the founders and portfolio managers at AOF, has invested in small-caps for 20 years and managed the private equity investment firm JPC. Meanwhile, Ben Terk served as a partner manager at Rho Capital for 10 years and led several minority investments and played an active role on several boards. Hence, Cinedigm might achieve a rewarding turnaround in the upcoming months, thanks to the expertise in the industry of AOF Management’s managers. The investment management firm launched its Active Owners Fund (AOF) in January 2011 that is entirely focused on finding small-cap investing opportunities. The fund reported a return of -4.9% in its first year of existence, 24% in 2012 and 28.5% in 2013, which indicates that Joe Pretlow and Ben Terk are very successful in managing their capital and investments.
Cinedigm Corp (NASDAQ:CIDM) is a leading independent content distributor in the United States, which has developed direct relationships with numerous physical retail storefronts and digital platforms. Its stock has dropped by nearly 55% year-to-date. Nevertheless, the company issued $64 million in notes back in April. It will use some of the capital to develop its portfolio of streaming video channels. More than $18 million of cash will be used to refinance the company’s debt, while some of the remaining cash will be used for its share repurchasing program. The company has also recently announced a $5 stock buyback program. It has also been rumored that the current CEO and Chairman of Cinedigm, Chris McGurk, is actively looking for a new chairman for the company, which might result in a fresh start for the company.