Weekend Values – October 24, 2010

Posted October 24th, 2010. Filed under Investing Links

As usual, here are a few value investing ideas from the past few weeks:

Arbitrage Opportunity – Brookfield Infrastructure Partners (NYSE:BIP) takeover of Prime Infrastructure Group (ASX:PIH)

Similar to other arbitrage opportunities posted here (see UBET/CHDN and FCEC/TOBC), this merger is a combination stock & cash deal expected to close in early December.

The transaction spans both the US and Australian markets so investors must take into account currency fluctuations in addition to the normal merger arbitrage risks.

However, it appears to offer attractive returns for the sophisticated investor who can take advantage of the mispricing.


“A Low-Risk, High-Return Micro Cap Spin-off with a Turnaround Twist”

A guest post on AAOI, this investment analysis combines several of my favorite traits in value investing: micro-cap underfollowed stock that is a spin-off from a larger company.

Using normalized numbers, the stock trades right at or a little under 1x EBITDA, obviously extremely cheap.

According to the author, a conversation with Howard Jonas, CTMMB’s CEO and largest shareholder, led to the following exchange regarding the author’s ownership in the company: “how did you get so much… I wish I owned more..”

The St. Joe Company (JOE) – Short Thesis

A number of presentations were made at the recent Value Investing Congress, but potentially none were as explosive as David Einhorn of Greenlight Capital on the St. Joe Company (JOE).

Entitled, “Field of Schemes: If You Build It, They Won’t Come,” Einhorn’s presentation is 139 slides packed full of information on his short thesis – it was powerful enough to move the market with JOE’s stock dropping almost 20% in the two days after Einhorn’s presentation.

To make things more interesting, another famous investor, Bruce Berkowitz at Fairholme Capital Management, is on the other side of the trade. It is an interesting case study that will be worth watching as it unfolds.

Owens Illinois (OI)

Another slide presentation from the Value Investing Congress, this time by Alexander Roepers of Atlantic Investment Management.

OI is the world’s largest maker of glass bottles, described as “a fortress with a massive moat.”

The business has high barriers to entry (usually local monopolies, long-term customer relationships, global scope, etc), and Owens Illinois seems well positioned to profit as glass packaging demand continues to grow.

Atlantic provides a price range of $27-$45 per share, substantial upside to OI’s current price.

Voting Power in the Activist’s Hands

Shareholder activists can be an incredible catalyst for unlocking returns in many of these undervalued stocks.

This is a great post describing the power of voting control for activist investors, and how buying and selling choices (whom to sell to, whom not to sell to, etc) can have a major impact on future decision making.


No positions.

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