The correct answer is      (D.)  Wendy's (WEN)

In early 2005, many investors had begun to believe that Wendy's -- home of the iconic square hamburger -- had lost its direction. Competition was stiffening, consumer tastes were changing, and the company's other concepts were drawing management's attention away from the core business. Although the company was not struggling, per se, many investors felt management wasn't doing enough to generate shareholder value.

So in early 2005, Bill Ackman and his Pershing Square Capital hedge fund began buying shares. By April he had purchased 9.3% of the company. Ackman and Pershing made the stake public by filing a Form 13-D with the SEC. That 13-D publicized Ackman's cause. In the filing, Ackman suggested that Wendy's would benefit from selling off some of its non-core restaurant concepts. He further suggested the market would react positively to a deal to refranchise the chain's company-owned stores.

Another activist shareholder, Nelson Peltz, soon entered the fray making similar demands of management and buying a near 10% stake in Wendy's by the end of 2006. Eventually, Wendy's caved. It agreed to sell off a stake in its Tim Hortons (NYSE: THI) chain in July 2005; that March 2006 IPO raised more than $670 million. Wendy's spun off the remaining stake to shareholders in October 2006, providing yet another source of gains for investors. In addition, Wendy's boosted its share buyback plan, aggressively cut costs, and agreed to sell 500 of its company-owned locations by 2009. Wendy's also welcomed three board members nominated by Nelson Peltz, handing a prominent activist a direct role in management. These changes all had the desired effect -- Wendy's stock soared.

The lesson here is that if you can identify promising companies with activist involvement, then you have the potential to earn solid gains if the activist can usher in positive changes.

Luckily, in the August 2007 issue of StreetAuthority's premium Market Advisor newsletter, Editor Paul Tracy profiled six firms with at least one activist shareholder holding a sizeable stake in the company. Should reforms be pushed through in these companies, then investors could see their holdings soar. To learn more about StreetAuthority's Market Advisor newsletter, and to read the complete profiles of these companies, please visit this link.