The Securities and Exchange Commission has recently disclosed four filings from Cove Street Capital, a fund led by Jeffrey Bronchick. In the filings, Cove Street revealed some changes to its passive positions in Westell Technologies Inc. (NASDAQ:WSTL), Carrols Restaurant Group, Inc. (NASDAQ:TAST), Approach Resources Inc. (NASDAQ:AREX), and Heritage-Crystal Clean, Inc. (NASDAQ:HCCI). In this article we will take a closer look into this filings and will disclose whether the fund decreased or increaset its exposure to these companies, as well as will try to understand some of the Mr. Bronchick’s motives behind these decisions.
In Westell Technologies Inc. (NASDAQ:WSTL), Cove Street revealed increasing its stake to around 6.11 million shares from 5.63 million shares the fund disclosed in an earlier filing. Following the increase, Cove Street’s stake amasses 13.21% of the company’s outstanding class A stock. The stock of Westell Technologies halved since the beginning of the year, mainly on the back of declined profits. The company reported a diluted EPS of $0.05 for the second quarter, down from $0.08 in the first quarter. Nevertheless, Westell Technologies Inc. (NASDAQ:WSTL)’s revenue went up to $27.8 million from $24.4 million. In addition insiders have been selling shares from their holdings of late. Therefore, Mr. Bronchick either sees some long or short-term opportunities, which explains why he bought the shares while they are still cheap, or he might plan to go activist on the company and come up with some ideas to increase the shareholder value.
In fact, Mr. Bronchick is not the only bullish investor on the company. During the second quarter, Jim Simons‘ Renaissance Technologies also upped its stake in Westell Technologies Inc. (NASDAQ:WSTL) by 3% and revealed ownership of 3.06 million shares in its latest 13F filing.
The manager of Cove Street also seems to be bullish on Carrols Restaurant Group, Inc. (NASDAQ:TAST), in which it upped its stake to 2.45 million shares, from 1.91 million disclosed previously. The fund now owns approximately 7% of the company’s outstanding stock. Carrols Restaurant Group, Inc. (NASDAQ:TAST) operates fast food restaurants under several brands including Burger King franchises. Cove Street bought more shares of the company following a recent announcement that Carrols Restaurant Group, Inc. (NASDAQ:TAST) intends to acquire 30 Burger King restaurants n North Carrolina for around $20 million. Following the deal, Carrols Group will also own 12 fee-owned properties and plans to sell or lease 10 fee-owned properties, expecting proceeds worth approximately $13 million.
Next on the list is Approach Resources Inc. (NASDAQ:AREX), in which Cove Street also raised its exposure and reported a 5.4% stake in the company. The fund currently owns around 2.12 million shares of Approach Resources Inc. (NASDAQ:AREX), up from 1.57 million it disclosed in its latest 13F filing. The stock of the small cap independent energy company has been volatile since the beginning of the year, and recently took another deep, which could explain Mr. Bronchick’s intention to buy stock at a lower price. The decline came on the back on a fall in profit for the second quarter to $3.8 million, from $7.8 million. However, the company’s revenue surged by 74% on the year to $73.4 million and its production capacity also went up by 58% on the year to 14.1 MBoe/day. Therefore the market probably overreacted and Approach Resources Inc. (NASDAQ:AREX) has a long-term potential, explaining Mr. Bronchick’s bullish sentiment.
Many other investors among those that we track share the same opinion regarding Approach Resources Inc. (NASDAQ:AREX). In particular, Chuck Royce‘s Royce & Associates upped its stake to 685,800 shares in the second quarter, from only 12,000 shares in the first one.
In the fourth filing, Cove Street revealed an increase in its stake in Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), reporting 1.34 million shares, versus 1.13 million disclosed previously. The stake is now equal to 7.2% of the company’s common stock. Heritage-Crystal is another stock that has been oscilating and currently took a dip, after jumping by around 7% at the at the beginning of the month. Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) is engaged in the parts cleaning, waste management, used oil collection. Even though the stock has lost more than 25% since the beginning of the year, it still has a consensus rating ‘Overweight’ with the average target standing at $20.00, which is significantly above the current price of the stock. In addition, Chuck Royce is also bullish on Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), raising his fund’s stake by 5% during the second quarter to 1.1 million shares.