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Special Situation Investing News 1/23/15



January 23, 2015 – Comments (0) | RELATED TICKERS: CONE , NSP , LE

TGIF everyone.  Here's a few special situation nuggets for your weekend reading.

The following is an interesting quarterly letter to investors from a special situation hedge fund that I keep an eye on called JDP Capital Management.

Of note for Cincinnati Bell (CBB) shareholders is the fund's commentary on its CyrusOne (CONE) position:

CyrusOne (NASDAQ: CONE) We initially purchased CONE in early February 2013 and have added to our position as the fund has grown. CONE s a data center REIT focused on being the go-­-to outsourced data center wner/operator for big non-­-tech companies. To date our annualized IRR s 23% including dividends and we still feel the company is attractively priced.

During the year CONE continued to outperform its pubic peers operationally. We are impressed with their consistent 17% unleveraged development yields, achieving 50% of company growth from existing customers, and maintaining ~60% operating margins. Full year 2014 sales and EBITDA will be up by 26% and 23% respectively over 2013, and 48%operating free cash flow margins leave plenty of capital for growth capex. CONE remains conservatively financed and owns enough land to expand its footprint by 400% in and around current developments.

CONE’s stock price has underperformed peers since its IPO due to fears that control shareholder Cincinnati Bell (NYSE:CBB) will pressure the stock when it sells the stake. The sector is also misunderstood by public investors because it sits between real estate and technology, sectors with very different investor bases. Growth trends in Big Data are eye-­-popping—but competing with CONE requires much more than writing  big check for land and buildings."

JDP Capital Management Up 37% In 2014



Starboard Value announced yesterday that it holds a significant 13.2% stake in the HR outsourcing firm Insperity (NSP), making it the company's largest shareholder. In a letter to the company's Board of Directors, Starboard told the company that it wants it to sell its private jets, eliminate conflicts of interest, reduce excessive executive compensation, and explore a sale of the company. If a combination of those actions are taken, Starboard believes that Insperity's stock is worth $54 - $65 or higher versus the $43 and change that it sits at today after a 4%+ rally on the news.

Starboard Discloses 13.2% Ownership in Insperity, Inc. and Delivers Letter to CEO and Board of Directors 



I mentioned Finmeccanica (BIT: FNC), the winning pitch in the FactSet Special Situation contest, a post or two ago. I have since established a small real money position in the stock.  I really didn't want to transfer any more money to my global trading account, but I did want the liquidity that trading the shares of the stock on its home exchange provides.  So I decided to sell my position in the ING forced spinoff NN Group (AMS: NN) and roll the proceeds into Finmeccanica. I absolutely love the idea. I expect currency moves to act as a headwind for the stock, but hopefully a weaker Euro helps the company's business making it a wash. 

It's worth noting that the company's new CEO is unveiling his much anticipated turnaround plan for the Italian industrial conglomerate on January 28th.

Finmeccanica to present new plan on January 28 



The Quartet Merger (QTET) / Pangaea Logistics Solutions (PANL) stocks were a popular special situation on the message boards and over on Seeking Alpha several months ago.  Since the purchase of Pangea by the Quartet was completed, the Joel Greenblatt-certified SPAC has been an absolute mess. I played around with a small position in the rights before prior to the deal. I'm sure glad that I quickly got the heck out of it. Shame on Greenblatt for accepting money to give this his seal of approval to this disaster.



Typically, everything that Sears touches turns to mush. At least it's been that way since Eddie Lampert became involved with the company. That's why I found the amazing performance of Land's End's (LE) stock post-spinoff so surprising. Just last week, LE was up over 65% since being spun off from Sears. Well, LE is got absolutely clobbered yesterday, down over 20% on news of weak sales in Q4. Some may think that the recent drop presents an interesting entry point for those who initially missed the boat on this one.  However, I am definitely staying away from Land's End as an investment.  I am wearing some very comfy Land's End slipon shoes right now though that my brother got me for Christmas many years ago.  They're still going strong. 


Lands' End's stock set for selloff after disappointing profit, sales outlook 


In the next couple of days, I plan to sit down with a beer and look through an on-line telescope at an asteroid that is coming dangerously close to Earth. I hope that Bruce Willis isn't busy, we may need his help.

Here's a link for anyone who's interested:

Big asteroid to fly by Earth Monday 


On a personal note, in my continuing quest to build the ultimate game room in my basement I have decided to focus my efforts on finding a bar-top / kiosk trivia, card game along the lines of the MegaTouch line of cabinets.  I have a lead that I am following up on tonight. As I try to do in investing and in life I think that I may have found a way to satisfy my urge for one without breaking the bank.  I'll let you know how it goes.

Thanks for reading.  Have a great weekend everyone!


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