There's Hidden Treasure Everywhere!
It's funny that everyone keeps talking about a market top and how we're due for a crash any day now. Are we at a level in the stock market like the one that we were at after the financial Armageddon a couple of years ago when you could throw darts at a list of stocks and come out a big winner? No. Nor are we at a point in time like when was able to Warren Buffett leaf through stock reports and scoop up decent companies trading at one times earnings. I think that the fantastic quote that CAPS leader bbmaven put at the top of the page sums up my thoughts on the current market best: "[At some point], Hussman and Grantham will be vindicated, but they won't make enough to compensate for the opportunities lost while cowering on the sidelines." T Armistead"
I am being a little cautious right now and am not putting as much money to work as I have in the past, but to say that there's no decent investment opportunities out there is silly. Granted, the headline of this post is a little sensationalist, but that's what gets the clicks ;). I am absolutely amazed by the number of special situations that are out there lately. Of course, I am actively looking for them more now than I have been at any time in my life, but I still think that there's more interesting special situations out there than I have ever seen. Perhaps it has something to do with the increase in the number of activist investors convincing companies to do just the sort of things that I look for in an investment, spin off assets, convert into MLPs and REITs, etc...
Here's a few that have popped up on my radar lately:
Barron's Stock Alert column is excellent. I probably like it because it definitely has a propensity to talk about special situations. Today I came across an article on the upcoming Energizer (ENR) breakup there. It actually is right up my alley. I'm not sure why I haven't bought into ths one yet. I guess it looks a tad on the expensive side. Of course, I originally thought that when I purchased ENR only in CAPS and not in real life and ithas risen 70% since then :).
Energizer Could Charge Even Higher on Breakup
There's two new write-ups out there on Timken Steel (TMST). I obviously like the fact that the company is a spinoff and that its products seem to be specialized rather than commoditized, however it clearly has not been growing at all. It remains to be seen if it will in the future. To me, TMST seems like a solid company, trading at a reasonable valuation...not a "I have to buy this now, sort of investment."
TimkenSteel: Spinoff Opportunity In Niche Steel Company
TimkenSteel: Trying To 'Steel' The Limelight, But Appears Fully Valued
I have not purchase shares of Timken Steel or Energizer in real life yet, just in CAPS. One stock that I have been purchasing is a company called Newcastle Investment Corp. (NCT). This is a cool one. The following article is a little old so both of the spinoffs that are described in it have already happened, but the main value driver here is the conversion of a REIT run by Fortress Investment Group that was formerly focused on debt and CDOs which is now changing its focus to senior living healthcare REIT.
Aside from the media and mortgage servicing REIT spinoffs, this situation strikes me as being very similar to another investment that I currently own that has done pretty well so far, CorEnergy Infrastructure Trust (CORR). Both are companies that completely changed their focus and morphed into REITs. Neither move was appreciated by Mr. Market and they both sport huge yields. NCT yields over 8% whensimilar REITs yield in the 5.5% range. I strongly suspect that denta will shrink significantly at some point after thecompany's senior living spinoff.
My Best Idea For 2014: Newcastle Investment, An 'Aging' REIT
http://seekingalpha.com/article/1911021-my-best-idea-for-2014-newcastle-investment-an-aging-reitThis one is very interesting.
Here's a link to NewCastle's recent investor presentation on the spinoff:
While I originally purchased my position in Newcastle because it has a significantly undervalued senior living REIT that it is going to spinoff in the near future, the company's remaining asset, golf courses, may not be as bad as I originally thought. NewCastle management is in the midst of restructuring its golf assets in an attempt to return them to profitability. This is actually a sector that may have a lot of interesting opportunities in it in the near future. I came across a great New York Times article about investment funds that have been set up to purchase some of the plethora of distressed golf courses out there. It sounds like a very interesting opportunity. The article is a worthwhile read.
Investors Are Buying Troubled Golf Courses and Giving Them Makeovers
That's just a few of the cool ideas that I've come across lately. I have 200 more of them in my CAPS portfolio here. Will the markets eventually experience a correction? Of course. I plan on having some dry powder waiting for when it happens, but I certainly am not going to sit on the sidelines with my cash earning 0% interest waiting for that to happen when there's lots of interesting investment ideas out there.
Thanks for reading everyone. Have a great weekend. As always, please share your interesting ideas.