Alexander Seaver’s Stadium Capital Management has filed a Form 4 with the U.S. Securities and Exchange Commission on Big 5 Sporting Goods Corp. (NASDAQ:BGFV) revealing that the fund currently owns 2.64 million shares, which represent 11.89% of the company’s outstanding common stock. According to the public filing, Stadium Capital Management acquired 124,000 shares of the sporting goods retailer through three transactions at prices in the range between $10.81 and $10.99.
Stadium Capital Management is a privately owned hedge fund established by Alexander Medina Seaver in 1997. The Oregon-based fund employs a research-driven investing approach, while its investment principles deeply resemble the philosophies of Ben Graham and Warren Buffet. Stadium Capital Management is keen on uncovering compelling investment opportunities in the U.S. public equity markets, and has been successful thus far considering its investment track record. According to the fund’s most recent 13F filing with the SEC, Alexander Seaver and his experienced investment team currently manage a public equity portfolio worth $382.59 million.
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Big 5 Sporting Goods Corp. (NASDAQ:BGFV) is one of the top retailers of name brand sporting goods and accessories in the United States. The sporting goods retailer provides a wide product portfolio that includes athletic shoes, apparel and accessories, along with a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, among others. The shares of Big 5 Sporting Goods have dropped by over 25% since the beginning of the current year, partly owing to the significant slump in the company’s share price after announcing the financial results for the second quarter of this year on July 28.
In mid-March, Stadium Capital Management, as a major shareholder in Big 5 Sporting Goods with an ownership stake of over 11%, sent a letter to the President and Chief Executive Officer of the sporting goods retailer, Steven G. Miller, regarding the company’s governance practices and pinpointed clear actions that should be implemented so as to unlock greater shareholder value. Dominic P. DeMarco, who currently acts as managing director, co-chief investment officer and chief compliance officer of Stadium, joined the Board of Directors at Big 5 in October, 2011. In the letter sent to Steven Miller, Stadium Capital Management suggested that Dominic DeMarco has assisted the company in creating substantial value for stockholders since he joined the Board in 2011, but he has encountered resistance when attempting to improve the company’s governance practices, which are believed to hinder the creation of shareholder value. Nevertheless, at the beginning of May, Big 5 Sporting Goods announced its agreement to support the proposal submitted by the hedge fund and took serious steps toward improving the company’s governance. Considering the fact that the sporting goods retailer displayed its commitment to enhance its Board composition and governance, the key to unlocking shareholder value has been found.
Following the positive news regarding the improved board governance, the shares of Big 5 Sporting Goods have not shown any signs of weakness until the company posted its financial results for the second quarter of 2015 a few days ago. The sporting goods retailer posted net sales of $240.4 million for the quarter, compared to net sales of $231.2 million reported in the same quarter a year ago. However, despite achieving an increase of 3.83% in net sales year-over-year, the company couldn’t meet the analysts’ estimates of $243 million. At the same time, Big 5 reported a net income of $2.6 million or $0.12 per diluted share, compared to a net income of $2.5 million or $0.11 per diluted share a year ago. When announcing the financial results for the first quarter of 2015 a few months ago, Big 5 projected adjusted earnings per share in the range of $0.12-$0.17, which might actually explain the reason why the market reacted so negatively on the announcement of its second quarter financial results. Within our database, Mario Gabelli’s GAMCO Investors represents the second-largest shareholder in Big 5 Sporting Goods Corp. (NASDAQ:BGFV) with 406,500 shares, as of the end of March.
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