Our previous Fallen Spinoff analysis (July 2019) saw value creation in Perspecta, Inc. (PRSP), and our entry recommendation at $23.70 rallied to its pre-pandemic high of $29.50 in February 2020 (a +25% return, now back to our recommendation levels dropping with the market). Our newest screening process yielded KAR Auction Services, Inc. (KAR), which we believe has several catalysts for growth and will create value in the post-pandemic used auto auctions space.
28 May 2020
Our screening process for insider buying and selling has yielded three short ideas: Arrowhead Pharmaceuticals, Inc. (ARWR), CDK Global, Inc. (CDK), and Computer Programs & Systems, Inc. (CPSI). Aside from each company's insiders selling into price weakness (a sign of future underperformance), we have identified further pressures expected to push the share prices lower, offering short opportunities.
26 May 2020
Value creation comes in many forms in the Special Situations space, and often companies need a friendly (or not-so-friendly) push from activist investors in the “right direction” to achieve shareholder returns. We took ten of the major US activist firms and examined the positions taken over the last 15 years to determine who is King of the Activists in terms of absolute (buy on date of entry and hold for two years) overall returns and compared to their respective market cap and sector indices.
27 April 2020
In a screen for potential break-ups originally conducted in November 2019, we found that Gilead Sciences, Inc. (GILD) will benefit in performing a Spinoff of its HCV business. The current environment reinforces our thoughts on this split. Please read on for more and see the attached analysis included.
15 April 2020
One of the top players in the agribusiness and food industry and part of the big “ABCD” four that dominates the space (Archer Daniels Midland (ADM), Cargill and Louis Dreyfus), Bunge Ltd (BG) witnessed fourteen different open market purchases in 2020, with two of those buys holding a stronger buying signal than others. With additional factors at play include the presence of activist investors, new CEO and a potential separation on the table, we’re going to take an initial stake.
09 April 2020
To inform our analysis into finding the next value ideas in this current market environment, we started by examining the sectors that outperformed the S&P 500 Index following the 2008 financial crisis (recovery started on March 2, 2009). The data shows six sectors (out of the total 11) that have consistently outperformed the S&P 500 Index in the five years after the recovery. We have narrowed down to three names (one European and two US) that are worth buying at current levels.
25 March 2020
The Cheesecake Factory, Inc. (CAKE), the upscale dining chain known for its large menu and strong brand value, is an interesting situation the market loves yet continues to underperform peers. However, with the recent addition to its Board of Directors of a sell-side restaurant research analyst, we believe activism is beginning to influence the company. JANA Partners has also been exploring the sale of peer Bloomin' Brands. On our valuation and potential activism, it's a good time to enter CAKE.
05 March 2020
The Edge’s analysis of the retail sales over Black Friday and Cyber Monday confirms the polarization of high-end and low-end retailers. We have also found that BOPIS (buy online, pick-up in-store) is currently the preferred method of purchases on the high street. The retailers, all of which are recovering from the retail apocalypse and have embraced this new style from the consumer, are starting to gain with real traction. Those that are not adapting are falling behind quite fast.
16 December 2019
After years of operational underperformance by the management of Bed Bath & Beyond, Inc. (BBBY), which translated into diminishing returns for shareholders, a trio of activist investors called for a strategic overhaul in March 2019. After revamping the board in May 2019, our interest turned to the recent hiring of CEO Mark Tritton. Drawing similarities from covering and analyzing successful turnaround stories, we believe there is more to come for BBBY.
11 November 2019
Following Fluor Corp.'s (FLR) strategic review which completed on September 24, the management highlighted plans to several business segments on the block to refocus on engineering, construction, and maintenance services. However, in the process, they've undervalued the Government segment in their targeted sale price, and we believe there's further value to be had in performing a Spinoff instead. With the right activist-led push, that Spinoff (and resulting upside) can be made a reality.
11 October 2019