Regardless of the merits of Lipson's arguments, it's clear his investment in Anworth has succeeded. Since the start of the year, Anworth's stock has risen 26 percent versus a mere 2 percent rise in the S&P 500. Indeed, Anworth now trades at about 85 percent of book value versus an average of 91 percent for a group of comparables, DeLaney said.
Despite Anworth's relatively small discount to the group, Lipson is fighting on. One strategy he wants to pursue is continued share repurchases. With the company trading below book value, there's an opportunity to sell securities at market prices and use the proceeds to purchase stock.
While Anworth had a repurchase program in place before Lipson appeared (and has subsequently increased the size of it), Lipson argues that the company's managers are more interested in hording assets to maximize management fees. The company has said its management structure is consistent with the industry standard and its fees are below average. An Anworth spokesman declined to comment beyond the statements the company has already made.
Lipson also argues that his directors could choose a management team that would be better at selecting securities, possibly diversifying into instruments beyond pure government-backed debt that could deliver better returns.
But barring a drastic change in Anworth's strategy, there probably isn't too much more upside form here. Delaney estimates that if Anworth's portfolio were liquidated, the proceeds would probably be worth about 95 percent of book value after expenses.
And realistically, Lipson's campaign now looks like a long shot. On May 9, proxy advisory firm ISS recommended that shareholders elect all six of the company's own nominees rather than those proposed by Lipson's fund. ISS tends to have a big influence over board nominations because many investors prefer to take its advice rather than spend their own time evaluating board nominees.
Even so, Lipson is standing his ground. "I'll continue to preach that the company is ill-equipped to manage this kind of money," he said.
How can Lipson's strategy make economic sense? After all, his fund's roughly $29 million investment in Anworth looks too small to mean much if the stock moves by a few more percentage points.
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According to Lipson, Western has managed to minimize expenses such as staff and rent well enough to make such investments worthwhile. "I have an entirely different cost structure," Lipson said. "We don't have all that formal structure you would have in New York."
Lipson, who started working on Wall Street in New York in 1968, said his background in fixed income taught him to seek out opportunities for relatively small gains. After founding Western in 1995, he focused on investing in closed-end bond funds that traded at a discount to book value. Just as with Anworth, he has often urged companies to liquidate assets and make repurchases to drive valuations closer to book value.
One of Lipson's presentation slides shows a list of 38 such situations. While Lipson quite often achieved a positive outcome, his gain may only have amounted to a couple of percentage points. Not surprisingly, such campaigns received little public attention. "I work in areas that people don't pay attention to," he said.
Lipson's focus on modest returns may not always be so unusual. Wall Street saw a surge in activism in 2009, when investors identified plenty of bubble-era excesses like inflated cost structures that needed to be fixed.
But much of that low-hanging fruit has probably been picked. The number of proxy contests at major U.S. companies has risen steadily over the last few years. Some 24 have been launched already in 2014, compared with just nine in the first six months of 2011, according to ISS.
The median market capitalization has also swelled, reaching $449 million, ISS said. Arguably, it's harder to move the needle at giant companies like Procter & Gamble, which was a target of Ackman's Pershing Square last year. While Ackman made a number of aggressive arguments against P&G, he sold down most of his stake within several months.
As for Lipson, he doesn't mind being known for less-flashy deals. "If the guys on Wall Street are Saks Fifth Avenue, I'll be Wal-Mart," he said. "OK, I'll be Costco."