Hedge Fund's Adult Education

Two other hedge funds that rank among the largest investors in New Frontier, San Francisco-based Stephens Investment and New York-based Fine Capital Partners, one of the few hedge funds led by a woman, declined to comment.

If nothing else, New Frontier has been a modestly successful investment for Steel Partners and the other hedge funds that have followed in its footsteps. Over the past 16 months, New Frontier's stock has risen from $6.45 to $6.76. But Steel Partners' investment has risen about 14% thanks to intervening purchases at lower prices.

In May, in fact, Steel Partners investment was even more valuable. The stock briefly traded above $9 a share, its highest point in two years. Some on Wall Street had attributed the rise in New Frontier's shares to investors climbing on the Steel Partners bandwagon and expecting big things to come.

But the stock got crushed in June and fell back toward the $6 mark after its fourth-quarter earnings disappointed Wall Street. While the company's net income rose 38% to $3.3 million in the fourth quarter, the $12.9 million in revenue the company took in fell short of analyst expectations. The company is due to post first-quarter earnings on Tuesday morning.

However, Lichtenstein didn't see the disappointing earnings as a signal to bail out of New Frontier. Instead, the hedge fund used the selloff as an opportunity to purchase another 309,000 shares, raising its equity stake to the current 15%.

A spokesman for Lichtenstein and Steel Partners declined to comment on its strategy for its New Frontier investment. But a person familiar with the hedge fund says that despite its reputation as an aggressive shareholder activist, there are many times that Steel Partners is simply a passive investor. Historically, this person says, Steel Partners will invest in a company with the objective of holding onto the shares for several years and hoping they increase in value.