A hedge fund has increased its holdings in Monster Worldwide, the big global employment-site company whose stock has been scraping against new lows lately.
Eminence Capital, a hedge fund based in New York, said in a new SEC filing that it has increased its stake in Monster to 5.7 percent, or about 6,773,220 shares, from the 4,964,648 Monster shares it reported owning at the end of the first quarter of 2008. The hedge fund has about $4.5 billion in long stock positions.
Although Eminence described the stock purchase as a passive investment, in the past it’s sometimes taken an active role in shareholder issues. It opposed the food-services company Aramark’s plan to take itself private, for instance, and it forced Kohlberg Kravis Roberts & Co. to increase its purchase price of the building-products company Masonite International Corp.
Monster has been dogged by problems for the past several years, hurting company morale, along with its stock price. The past year has included a security breach affecting 1.3 million users of its main employment site, Monster.com; the launch of a stock-options fraud case by the U.S. Securities and Exchange Commission in which former Monster CEO Andrew McKelvey eventually agreed to pay $275,999 after the SEC accused him and others of “multiyear schemes to secretly backdate stock options granted to Monster officers, directors and employees”; and layoffs of Monster staff estimated at 800, or about 15 percent of all employees.
CEO Sal Iannuzzi, who’s been at the helm for a little more than a year, seems to be doing his best to steer the company in a new direction. But it’s tough to turn around an aircraft carrier quickly – especially when it’s got torpedo holes in the hull (even if those holes are from its own torpedoes). The stock has fallen from a high of 47.21 in April 2007 (it sold at 57.40 in April 2006) to 17 and change earlier this week. And the prospect of a recession in the United States, and possibly much of the world, doesn’t bode well for a company that relies on help-wanted ads for practically all of its earnings.
That certainly makes Eminence’s purchase of additional Monster stock all the more remarkable – although hedge funds as a class have had an uneven track record as investors. They’ve tended to rely on high investor fees as much as investment prowess to make money. At least one of the world’s greatest investors, Warren Buffett, has been betting against them lately.
Could Eminence be bottom-fishing in hopes of provoking or benefiting from a takeover, which has long been rumored at Monster (though denied by Iannuzzi)? In the weird world of Wall Street, where momentum is king, takeover candidates are seldom purchased at bargain-basement prices. More often they’re bought out at or near tops, during the crest of market fads. (Witness the misguided buyouts of the dot-com era, for instance; or, more recently, of Yahoo, or Carl Icahn’s attempted buyout of the Florida developer WCI Communities last year.)
Monster Worldwide’s shares hit their new low on Monday, $17.62, after Christa Quarles, an analyst at Thomas Weisel Partners, lowered her price target for the company from $50 to $40. Although she reduced her estimate of Monster’s fiscal 2009 earnings from $1.90 to $1.46, she still recommended that investors overweight the company in their portfolios. Consensus estimates by Wall Street analysts for next year are a bit higher, $1.79. Is Monster a buy at these lows? Again, in the weird world of Wall Street, a buy recommendation does not always mean buy, as many analysts are reluctant to alienate the corporate brass and are hesitant to issue sell recommendations. A Hold can mean Sell, and a Buy can mean Hold, for those willing to read between the lines.
Monster’s next quarterly call for financial analysts is July 31 at 4:50 p.m. EST.
The teleconference will be available by dialing 888-551-5973 (706-643-3467 outside the U.S.) and referencing conference ID 54799235. The conference can also be accessed via the company’s Web site: http://corporate.monster.com.
