Marcato Capital Management, the hedge fund headed by Mick McGuire III, acquired 2,926,242 shares or a 7.2% stake in Life Time Fitness, Inc. (NYSE:LTM), based on its Schedule 13D filing with the Securities and Exchange Commission (SEC).

Life Time Fitness

Reason for investing

Based on its filing, McGuire’s firm invested in Life Time Fitness, Inc. (NYSE:LTM) because the shares of the company were undervalued and represent an attractive investment opportunity. The hedge fund indicated its intention to discuss with the management and board of directors and other shareholders of the company regarding the business, strategies, and other matters.

Marcato Capital said such discussions may review “options for enhancing shareholder value through various strategic alternatives or operational or management initiatives including, but not limited to, improving capital structure and/or capital allocation, strategic transactions, and general corporate strategies.”

Other investors

Wasatch Advisors is the largest shareholder of Life Time Fitness, Inc. (NYSE:LTM) with 3,886,824 shares or a 9.51% stake, followed by Columbia Wanger Asset Management with 3,187,500 shares or a 7.8% stake as of March 31, 2014.

Other hedge funda including Phill Gross and Robert Atchinson’s Adage Capital Partners owns 575,000 shares, and Steven Cohen’s SAC Capital Advisors also owns 352,101 shares in the company.

Life Time Fitness’s business and financial performance

Life Time Fitness, Inc. (NYSE:LTM) is an operator of multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. The company has 110 Life Time Fitness and Life Time Athletic center as of April, 2014. Last year, the company reported $1.2 billion in revenues.

Last month, Life Time Fitness, Inc. (NYSE:LTM) posted a net income of $28.3 million or $0.69 earnings per diluted share and $32 million in revenue for the first quarter of 2014. Its cash flow from operating activities increased to $77.7 million.

The company reaffirmed its business outlook for 2014 and expected its revenue to increase by 8% to 9.5% or $1.2 to $1.32 billion driven by price and mix optimization, square foot expansion, and growth in in-center and ancillary business revenue. Its net income is expected to increase by 3% to 7%, or $125 million to $130 million or $3.05 to $3.15 in earnings per share.

The stock price of Life Time Fitness, Inc. (NYSE:LTM) is down by nearly 2% to $55.15 per share at the time of this writing around 12:46 P.M. in New York. Over the past 52-weeks, the stock has traded from $40.15 to $56.94 per share.