The Best Investment Of My Career
Back in the dark days of 2020 I was actively buying a conglomerate around a couple bucks per share. The stock had fallen from the highs of $40 down to a valuation where everyone thought bankruptcy was on the horizon.
My thoughts on the valuation were pretty simple at the time. Either the stock went to zero and I lost all of my capital. Or the company somehow survived the pandemic and you get at least a ten bagger. If I sized my position right, a 1-2% position could easily become a 10-20% position, and if I was wrong I would only lose 1-2% of my capital. It was an asymmetric bet I was willing to take.
Fast forward a few months and the company ended up surviving. The stock went from $2 per share to $10 and continued to climb. I ended up selling out after the company announced a “go-private” transaction to private equity that seemed significantly under the fair market value of all of the assets.
The “go-private” transaction ended up failing as investors voted down the private equity deal. The stock fell under $10 per share and I started aggressively buying again.
Then one day I woke up and saw the company announced a significant asset sale. The asset sale was an attempt to sell one of their three business units for almost one billion dollars. One billion dollars for a company that was trading less than $100 million only one year ago during the pandemic. The stock shot up. I continued to purchase shares as it appeared the entire company was in play to be sold. My analysis suggested each business unit could be sold for close to one billion each.
This past Monday, the company announced that the sale of this asset closed. In addition, the management team announced they are doing a $12 dollar per share special dividend along with a pretty aggressive stock repurchase plan. All of the remaining proceeds will be used to pay down debt.
My average cost basis in this company is $12.50 per share. Getting a $12 dollar per share special dividend in less than a month will be significant. This dividend check is a higher payment than my first year salary at my first professional job.
It is mind blowing. Almost all of the risk in this investment will be returned to me in early February, and I can ride the rest of the investment using house money. In addition, I think this company could selloff the remaining two segments for close to a billion each. Should this happen, I am guessing the management team does additional special dividends, that could be even higher than the $12 per share they just announced.
This may be the best investment of my career and it is only just starting. All of my initial capital is getting returned to me and I can ride out the rest of this investment using house money. Should management sell the other two divisions, I stand to make a significant amount of money.
I have highlighted this investment to the community of over 1,500 investors on Alpha Letter multiple times. We have a pretty great discussion ongoing about the tax treatments of this special dividend along with what the company will look like in a couple of years. The stock is up over 20% in 2022 and anyone who bought on my initial research is getting most, if not all of their capital returned in a month.
You can get access to this community along with an archive of all my past research and future research. Join the discussion today.
Alpha Letter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser.
Alpha Letter is a publisher of financial information, not an investment advisor. We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.