Little-known Allied Defense Group (ADG), a maker of ammunition and light weapons for military use, is catching the eye of some activist investors, including Pirate Capital, which has a 12% stake, and Wynnefield Capital, which owns 8%. Both take big positions in undervalued companies where they see potential, then pressure management to take steps to enhance shareholder value. Two companies where Pirate has bought in, James River Coal (JRCC) and Canadian resort operator Intrawest (IDR), recently hired investment banks to map out strategy. Neither Pirate nor Wynnefield returned calls. One pro who owns stock says Allied will be "looking for ways to boost its stock to get Pirate and Wynnefield off its back." Michael Hoffman of investment firm Friedman, Billings, Ramsey Group (FBR) rates ADG, now at 23, "outperform," with a 12-month target of 29. He sees it earning $1.66 a share in 2006, compared with an expected loss for 2005 caused by delays in shipments. The shortfall is expected to be made up in the first quarter. ADG declined to comment.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial