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Special Situation Investing News - 8/5/2012



August 05, 2012 – Comments (7) | RELATED TICKERS: UIS , WPX , WPC

1) Here's what one of my favorite and one of the more successful activist investors JANA Partners has been up to:

Jana Partners Exceeds Expectations: Fund Up 11.2 % YTD 


2)  I just came across this interesting Seeking Alpha article on Unisys.  While this stock is not my cup of tea, I love how the article clearly lays out the company's hidden assets and potential catalysts that could cause its stock to rise. 

Unisys: A Cheap, Successful Turnaround


3)  A short article on two of the more interesting hedge fund managers that I follow, their recent performance and new positions:

Ackman, Einhorn's Hedge Funds Outperform in July 


4)  A short, but interesting article, with a pretty graph as an added bonus, about how spun-off companies have outperformed the S&P 500 recently:

Spin-Offs Continue to Outperform the Market


5) Yes another article about how the sum-of-the-parts is greater than the whole at Loews (the conglomerate, not the home improvement store):

Loews: More Than Meets the Eye


6) An update on W. P. Carey's plans to convert into a REIT (I love REIT Conversions):

W. P. Carey Provides Update on Its Proposed REIT Conversion and Merger With Corporate Property Associates 


7)  thank goodness I dumped WPX after it was spun-off from WMB.  I was much more interested in the company's pipeline business than its E&P operations, not to mention the fact that I was scared off by its exposure to Argentina, the King or Queen (whichever you prefer) of nationalizing foreign assets.  Yes as the author states, WPX is cheap right now, but probably not cheap enough for my taste yet: 

WPX Energy - A Natural Gas E&P Spin-Off At A Discount 


Wow it's getting late.  That's all I have the time for right now.  Enjoy and have a great evening everyone!


7 Comments – Post Your Own

#1) On August 05, 2012 at 11:00 PM, XMFRoyal (96.68) wrote:

Great stuff, Deej. I love this idea!



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#2) On August 06, 2012 at 4:46 PM, TMFDeej (98.37) wrote:

Thanks Jim.


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#3) On August 06, 2012 at 7:48 PM, jwebbzor (< 20) wrote:

Jason, I've been watching NTI since you mentioned it last tuesday...

Strongest IPO I've seen in a long time.

Keep up the good work.

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#4) On August 06, 2012 at 8:01 PM, TMFDeej (98.37) wrote:

Thanks  jwebbzor !


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#5) On August 06, 2012 at 8:46 PM, constructive (99.97) wrote:

Speaking of Loews, have you seen this website:

Very interesting thoughts on Berkshire-like companies including L, MkL, Y, LUK, GLRE, BH, etc. Also investment banks, private equity, sum of parts and stub opportunities.

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#6) On August 07, 2012 at 4:38 PM, TMFDeej (98.37) wrote:

That is a good one.  Thanks Mega.


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#7) On August 10, 2012 at 5:33 PM, bcvz (< 20) wrote:

Love your blogs Deej, and happy belated bday.

Speaking of special situation opportunities, have you ever heard of Pulse Seismic? (PSD.TO)  The company licenses seismic data to oil and gas companies in Canada.  Market Cap = $156m

The special situation is their hidden asset; their seismic data.

Under accounting rules, they have to depreciate the seismic data quite aggressively, which wipes out their entire earnings basically. However, Pulse has proven that this data doesn't actually lose value, as they still license and make money from data that was produced in the 1960s.  

Their data is now down to about 90m on their balance sheet, but this same data has already produced nearly 40m in FCF after only 6 months this year.  That is $40m FCF after 6 months for a company with a market cap of only $156m!!!!!

The cost to replicate this data would be in the billions, and it is very unlikely that a company would ever try to replicate their library and compete with them.  It would make absolute no sense whatsoever.   Pulse doesn't even obtain new data themselves unless they already have a company willing to pay for a license of the new data.  So all new data "surveys" are co-funded between Pulse and the company wanting the new data. 

To prove their economic moat, or competitive advantage, one doesn't have to look far, as their gross margins are above 90% consistently year after year.

They made a very timely purchase of a competitor during the economic crisis, and have been aggressively paying down the debt for that purchase.  

Once that debt is paid off (2-3 years), I think they will have no problem tripling or quadrupling the current dividend, which is already an impressive 3.2% yield, which represents a mere ~10% of FCF. 

And also worth mentioning, they have produced these impressive results with nat gas prices incredibly suppressed. That has to give an investor some type of comfort.

Pulse is my largest holding outside of my ETFs which are my core holdings. 




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