Similar to how I recently took advantage of the tragic BP Gulf Oil spill to purchase stock in the offshore driller Ensco (ESV) and Transocean bonds when their values dipped (and have subsequently recovered significantly), I am considering using the continuing turmoil in Europe to add shares of a quality company to my portfolio that had its stock price temporarily impacted by the situation. [more]
Back in May I was looking around and came across a small, basically overlooked company that had more cash on its balance sheet than Mr. Market was giving it credit for. That company was Harbinger Group (HRG). There has been a ton of interesting developments with this story since then. Much to my chagrin, the stock has dropped 29% since I added it in CAPS (fortunately not in real life). Having said that, many intelligent people are touting it as a good investment with a ton of upside right now. [more]
Anyone who looks at my CAPS portfolio can tell that I am a big fan of investing in special situations. There's lots of different types of special situations, including spin-offs, companies that are emerging from bankruptcy, etc... One that I have been taking a close look at lately is activist investors. Following in the footsteps can often generate significant returns for investors.
Not all activist investors are created equally though. That's why it is important to not only evaluate each individual situation on its own merits rather than blindly following in the footsteps of someone else, but to find the right activist investors to follow. One that has caught my eye lately is a hedge fund called Ramius.
According to Barron's, Ramius has made 12 activist investments aka 13D filings with the SEC since the beginning of 2009 (they certainly have been busy haven't they). The average return for these 12 filings is 33.1% since then, compared with 6.6% for the S&P 500. That's just the sort of track record that I'm looking for.
So what has Ramius been up to lately? The company recently filed a 13D for a company called SurModics (SRDX). According to Yahoo!,
SurModics Inc. provides drug delivery and surface modification technologies to the healthcare industry. It offers coatings, microparticles, nanoparticles, and implants; surface modification coating technologies that impart lubricity, prohealing, and biocompatibility capabilities; and components for in vitro diagnostic test kits and specialized surfaces for cell culture and microarrays.
I'm not going to pretend to be an expert on the pharma or biotech industry so I can't handicap the chances of SRDX doing well on its own going forward. What I can do, however, is follow someone who knows a lot on the subject and has formulated an opinion on the company. Ramius makes tons of investments in this sector and it has been very successful in doing so.
Ramius often looks for companies that have solid, profitable core businesses that are wasting money hand over fist by plowing the profits from their core products into unprofitable new ventures. Ramius often takes activist positions in this sort of company and tries to get them to circle the wagons so to speak. To maximize the profitability of their main product line and sell their non-core businesses.
SurModics apparently has a great core business of selling coatings, especially in the cardiovascular segment. It has been wasting the money that it makes there on thus far unsuccessful joint ventures in the pharmaceutical and ophthalmologic segments. Ramius believes that SRDX's core business has "tremendous" value, with cutting-edge technology and a solid list of clients.
Ramius wants the company to replace some of the directors on its board and to focus on maximizing the profitability of its cardiovascular coatings business. I'm going along for the ride with them...at least in CAPS.