(FORTUNE Magazine) – J. CARLO CANNELL IS giving me tips on cooking with a Crock-Pot, which he does in his San Francisco office. "I like to ram in a whole turkey, cook it all day, and then serve it with cranberry and some spicy mustards," he says. Not exactly standard fare from a high-end hedge fund manager. But then again we're talking about a guy who owns a van with THINK PEACE painted on it in graffiti-art style (check it out at his website, donkeynation.com) and who loves to swim the Alcatraz Invitational across San Fran's frigid, shark-infested bay. Carlo's writings are as colorful as his hobbies: He recently noted there are more hedge funds than Taco Bells in the U.S. (That's bad.) And he boasted that he "acquires information like a rodent foraging through trash." (That's good.)

Carlo's way may be wacky, but there is definitely something to it. His Tonga hedge fund has averaged a net 25.8% annual return since 1992. With $324 million under management, Tonga, which trawls in small stock waters, is hardly a hedge fund blue whale. (Overall, Carlo runs a total of $800 million.) But in part that's because Cannell doesn't want it to be. Over the past five years Cannell has returned some $250 million to investors because he doesn't think he can produce outsized returns if he has too much money to worry about. "We can't add value buying Exxon or Procter & Gamble," he says. "We have a much better chance of finding value at a flea market in Texarkana than at Sotheby's."

Of course, sometimes value needs to be extracted. And Cannell, 42, has no qualms about publicly savaging a CEO who he feels isn't up to the job. In that regard he bears a resemblance to even more aggressive practitioners of the art of shareholder activism, such as Dan Loeb of Third Point and Carl Icahn. But like any investing strategy, berating underperforming managers is no slam-dunk.

Cannell recently thought he had spotted a bargain in an under-the-radar New York money management firm, BKF Capital. Run by a respected investment advisor named John Levin, it featured a board packed with Wall Street heavyweights Barton Biggs, Peter Solomon, and Anson Beard, as well as Princeton professor Burton Malkiel. But Cannell believed BKF was poorly managed and riddled with nepotism. His beefs--first made public in my online column on June 2, 2005--were hardly subtle. In a letter to the board, Cannell railed against the company's "monkeyshines," "meretricious trappings," and "perfumed menservants."

A proxy fight ensued over the summer. Three board members left, and Levin was made chairman emeritus. A veteran money manager, John Siciliano, was installed as CEO. So Cannell won, right? Well, not exactly. Or at least not yet. BKF's shares have plunged during the proceedings, and Cannell's multimillion-dollar position, though small (and representing less than 2% of Tonga's portfolio), appears to be deeply underwater. SEC filings show that Tonga purchased BKF at prices between $30 and $40 a share. The stock now trades for under $17.

Why the swoon? A major reason is the departure of money managers Frank Rango and Henry Levin (the son of John Levin), who together ran portfolios that accounted for 44% of the firm's revenues. Apparently the duo left after they were unable to negotiate what they considered to be an adequate pay package--and the fear is that many of BKF's investors will leave with them. "Carlo won the battle but lost the war," says a fellow money manager. Not so fast, says Cannell. Speaking of the departure of Levin and Rango, he says: "A cancer was just cut out of the patient. If BKF had met their ransom demand I would have been very upset." Still, it's a long way back from $17 to over $40. "We are very patient," Cannell responds. "No one knows what this company will earn in 2007." Well, at least we know he doesn't mind slow cookers.

ANDY SERWER, editor at large of FORTUNE, can be reached at aserwer@fortunemail.com. Read him online in Street Life on fortune.com and watch him on CNN's American Morning and In the Money.