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I Love "Story" Stocks - Special Situation Investing News - 8/3/2012



August 03, 2012 – Comments (0) | RELATED TICKERS: MIC , AWK , KRFT.DL

1) Here's an update on one of my larger personal holdings courtesy of our very own Motley Fool. Macquarie Infrastructure (MIC) is an absolutely perfect stock for me. It shares all of the characteristics that I look for in an investment. It has a special situation-esque catalyst and it pays a solid dividend for me to wait until the catalyst materializes.

I love "story" stocks (as I call them) like MIC. When I say story stocks I don't mean some fairy tale about how this or that might happen in the future, but an actual specific event that has a very good chance at unlocking value in the future. In MIC's case it was a pending legal dispute between it and the co-owner of one of its businesses that had the potential, if successfully settled, to allow the company to significantly increase its dividend in the future. That's exactly what materialized at MIC, in addition to solid operating results, the company announced yesterday that it is raising its annual dividend from 2% and change to over 6%. If that's not a stock-moving catalyst, I don't know what is.

Why Macquarie Infrastructure's Shares Popped

This story stock reminds me of one of my other favorite recent investments American Water Works Company (AWK). It's not my biggest winner of all-time, but the story played out perfectly. The main catalyst here was that the company had been banned from raising customers' rates for several years as a result of being brought private and then public again by a PE firm. The clock was ticking on the time when AWK would begin raising rates and improving its poor margins. That's exactly what has happened, causing the stock to soar more than 90% since I first started buying it in CAPS and real life.

If you couldn't tell already, I love "story" stocks like these. Does anyone out there have any interesting stocks like that that they've read about lately?

I'd love to hear about them.

In other special situation news:

2) Deej real-life holding and recent spin-off ITT (ITT) crushed earnings today, causing the stock to soar nearly 12%.  I'll take it because another part of this transaction's, Xylem (XYL)'s recent earnings and guidance were fairly disappointing.

ITT 2Q adj. profit tops Street, revenue improves

3) Another Deej real-life holding, a dividend-paying free call option on nat gas prices with the potential for a pipeline spin-off, National Fuel Gas (NFG), announced better than expected earnings today as well.  It's not how well you do, it's how well you do compared to what Mr. Market thought was going to happen ;).

National Fuel profits fall on prices, weather

4) As a current shareholder of Kraft and a big fan of Dan Loeb (the investor, not the person) I welcome this news with open arms. It looks like he's more along for the ride on the spin-off than trying to do any activist-like maneuvers, but everyone loves some good confirmation bias ;).

Loeb's Third Point makes big bet on Kraft

5) Speaking of Third Point, here's a short ValueWalk article that discusses his fund's current holdings and recent results:

Dan Loeb’s Third Point Holds Kraft; Seems to be Short Treasuries

6) Well I would have liked to have been in on this one before United popped 20%+ yesterday, but there's probably still room to run.

This owner of a slowly dying dial-up Internet business announced that it plans to spin off its very profitable FTD business. I like the move as it will increase the likelihood of one or more divisions of the company being acquired.

United Online To Divide In Two- Will Spin Off FTD Floral Business; Stock Surges

Thanks for reading and sharing your ideas everyone.  Have a great weekend!


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