Hi, my name is Manav Janus but I prefer Asiddha Janus (Imperfect creature). I am a CFA aspirant and I mainly invest in special situations, Graham-style net nets and cigar butts. My intention behind starting this thread is to source new investment ideas of the above nature and for fellow interest investors to throw their ideas into the mix and test the strength of those ideas.
The intention of discussing investment ideas carries with it the risk of wrongful construction. I hope that those who contribute or read this thread act like adults and not make financial decisions based on the discussions here.
Special situation investing is defined as “In investing, a Special Situation is a specific structural, non-operational event that affects the value of a specific corporation or its securities. The term is used as an umbrella for numerous corporate restructuring, transactional or financial engineering efforts.” This type of investing was popularised by Joel Greenblatt. But Ben Graham had already mentioned “workouts” in his book ‘Intelligent Investor’.
Various corporate events that I follow are - Schemes of amalgamation like Mergers, acquisitions and takeovers, demergers and reverse mergers, special dividends, buybacks, capital reconstruction, rights issues, change in corporate structure and changes in the management team.
Special situation investing carries with it its own advantages and risks.
Risks involve - regulatory restrictions, complex deals which can exploit investors’ follies, and risks that are applicable to all equities and others.
Advantages - Arbitrage opportunities (low monetary risk), short-term opportunities other than in the nature of trading, can exploit market inefficiencies in small and mid-caps.
Most of you must be aware of Cigar butts and Net nets, which are essentially, highly undervalued stocks, going through rough times or otherwise, usually of bad businesses, which one can invest in to make a quick profit (within 1 or 2 years). These are usually book-value plays.
I hope that this thread will become a fertile ground for interesting ideas.