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Special Situation Investing News - 10/28/12



October 28, 2012 – Comments (4) | RELATED TICKERS: HY , ADT.DL , SDLP

Good morning everyone.  As I sit here in the Northeast preparing for the Stormzilla or whatever they're calling it today I thought that I'd take a few minutes to share a bunch of the interesting news on investing that I have found over the past week or so with all of my investing friends.  

Of note, and please don't take this as bragging...I look at it as more of an interesting phenominon than a personal acomplishment (OK a little of the latter, but more of the former ;) ), my CAPS score has gone absolutely parabolic lately.  I've put on about a thousand points in the past month or two, which isn't easy to do when you're not playing the Triple Inverse Bear Bull Mega ETFs, but actual real investible stock ideas that are mostly confined to one sector, special situations.

If anyone who's reading this has any ideas, please share them in the comments section.  Mega Short is always great with sharing ideas.  The more the merrier everyone. 

Anyhow, I hope that everyone stays safe during the coming storm.  Thanks for reading and have a great rest of the weekend!  Onto all the news about Special Situation Investing that's fit to print.  Enjoy!

Have I mentioned that I love spin-offs? Perhaps once or twice ;). A company that I personally own, ADT, was recently spun off from Tyco. Its stock rose significantly last week on news that an investor that I'm not familiar with called Corvex Management has taken a 5% activist sake in the company.

ADT says it has held talks with shareholder Corvex 

George Soros is now on board with Corvex Management in urging ADT to borrow money at cheap rates to buy back 45% of its stock.

ADT should boost shareholder returns by taking advantage of low interest rates to add debt, using the proceeds to repurchase shares, New York-based Corvex said in a presentation included in the filing. Boca Raton, Florida-based ADT is undervalued even though it’s the market leader in home security, Corvex said. 

Companies adopting an “equity-shrink” strategy have fared well, Corvex said. “Stable growth combined with an appropriate capital structure, ongoing share repurchases and clear investor communication of leverage target and buyback strategy has led to significant outperformance.”

Soros Joins Meister's Corvex Urging ADT to Buy Back Stock 


Here's an interesting one a pileline MLP spin-off (the best kind IMHO) by Marathon. The initial yield is a little lower than I normally would like, but it looks like it's positioned for decent growth going forward.

I thought that this one would be popular. Should have bought the IPO. I didn't notice that shares were available through Schwab until it was too late. Even with this one pricing at $22, above the expected range of $19-$21, it has soared on its opening day of trading to over $27. That seems like a lot to me, but the market looooves MLPs right now, particularly ones with solid businesses and parent companies like this one.



Here's an interesting article because it contains references to both sum-of-the-parts analysis and spni-offs, both very special situation-esque things.

Anglo American plc was upgraded at Bank of America Merrill Lynch as the departure of Cynthia Carroll as CEO is considered a catalyst to unlock value.

Analyst Jason Fairclough raised his rating on the mining giant to buy from netural and hiked his price target to 2,600 pence from 2,400.

He noted that Anglo is trading at a 37% discount to his sum-of-the-parts valuation and a 30% discount to the company’s discounted cash flow.

“We believe an incoming CEO may be a catalyst for change,” the analyst said, outlining several ways Anglo could unlock value.

These include spinning off its platinum business, spinning off its entire South African business from the international assets, and selling a stake in the Minas Rio iron ore mining project in Brazil.

Anglo American upgraded as CEO departure seen as catalys 


I was following NACCO's spin-off of Hysterical-Yale for a while. I never added shares of it in real life because while not negative, I'm not a raging bull on the economy and this seems like she sort of company that needs a strong economy to thrive. I almost forgot about HY until this week's Barron's article about it. The piece makes a solid case that HY will be able to close the 20% discount that it trades at to it's piers by directing of its free cash flow solely to it's operations and paying dividends and streamlining it's operations.

An Uplifting Story 


Yet another MLP IPO. This one is along the lines of another recent offering called Susser Petroleum Partners (SUSP) yet slightly less attractive. I continue to green thumb high-yield initial public offerings as part of my ongoing theory that they outperform the market.

Lehigh Gas Partners LP - Boom In Energy Limited Partnership Continues


Not all spin-offs are created equal, and that certainly appears to be the case with Seadrill Partners. It looks a little more expensive than I would like for a real-life purchase, but it is a spin-off and an MLP two things that I love, so that's enough for my CAPS portfolio even with its distribution of "only" six and change percent. That's probably still enough to drive yield-hungry investors wild in this low rate environment.

The way to play this one is probably to invest in the actual company rather than the new Limited Partnership:

Investing In Seadrill Is Preferable To Investing In Seadrill Partners 


4 Comments – Post Your Own

#1) On October 28, 2012 at 10:37 AM, TMFDeej (97.84) wrote:

Oh, BTW here's a great article that Bloomberg recently published on one of Buffett's new investment managers Ted Weschler. This is a story of a great combination of skill and luck.  Weschler was lucky to have the one single company that he's familiar with better than any other in the entire world turn into a multi-multi-bagger.  Yet, he also used his skills to take advantage of the situation and make a ton of money for him and his clients.  He then took some of the money that he made there and used it to buy lunch with Warren Buffett twice, thus getting to know him well and eventually leading to his current position at BRK.

It's an excellent read for anyone who find this sort of thing interesting like myself:

Weschler Rise From Grace Leads to Role Advising Buffett 

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#2) On October 28, 2012 at 4:22 PM, shamapant (< 20) wrote:

Deej, i love your special situation news updates. How do you find all this stuff? 

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#3) On October 29, 2012 at 9:59 AM, TMFDeej (97.84) wrote:

Thanks for the compliment, Shamapant.  I find this stuff fascinating so I read a lot...when I have the time.  Then any time I find something interesting I either bookmark it or set up an alert for it.  


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#4) On October 29, 2012 at 10:35 AM, constructive (99.95) wrote:

Cool article on Weschler.

Here's a webpage I recently found for spinoffs:

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