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A company with a terrible core business, yet still a ton of value



March 25, 2012 – Comments (4) | RELATED TICKERS: RTK

I know that Rentech's (RTK) core synthetic fuel business is complete garbage, but there still appears to be quite a bit of value here.  The company's recent fertilizer spin-off Rentech Nitrogen Partners (RNF) seems to be a decent business.  Rentech still owns over 60% of it, which using the RNF's current market cap is worth over $600 million.

Add to that the $190 million in net cash Rentech has and you're left with a company that is theoretically worth just under $800 million, yet has market cap of only $473.

Assuming Rentech's bad management and seemingly worthless synthetic fuel business don't destroy too much value this one looks like it has room to run.

The Special Situation Case for Rentech

Oh one other thing, is it just me or does the author's opening statement "Not one to usually share ideas (solely so that I can take ownership for Gad Capital's, Gad Partners Funds, and the Sham Gad Family successes and failures)," seem like a silly thing to say, particularly for an active blogger?  Why not talk about ideas after you aready have a position in them?  There's nothing wrong with talking your book as long as you're not trying to trick anyone into buying something that you're looking to bail on.  If anything, talking your book helps bring awareness to an undervalued stock and at the same time generates publicity for you as an intelligent stock picker.  Plus it helps people out.  I always like helping others and sharing good ideas...OK and some not so good ones ;).  Doing so like a win-win situation to me.  

Thanks for reading.  Have a great day everyone. 


4 Comments – Post Your Own

#1) On March 25, 2012 at 8:15 PM, constructive (99.97) wrote:

A quick glance at RNF suggests it's extremely overpriced at 40x cyclically high earnings.

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#2) On March 25, 2012 at 8:30 PM, constructive (99.97) wrote:

See page 41.  Based on past results, analyst projections for RNF don't seem credible. 

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#3) On March 26, 2012 at 10:54 AM, constructive (99.97) wrote:

However, based on this blog I've ended my red thumb of RTK.  You're right that this spinoff seems to be a catalyst that may send it significantly higher, even if RNF's valuation doesn't make sense.

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#4) On October 05, 2017 at 8:39 PM, constructive (99.97) wrote:

For the record, I was right. RNF and RTK went up in the year after the spinoff, then RNF fell 75% and RTK fell 99%.

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