Looking to chat to sophisticated investors

[planman]

New member Looking to start a ongoing thread where sophisticated investors can swap ideas about investment strategies like spin-offs, conversions, div capture strategies and market inefficiencies.

 

[LOL!]

May I suggest you start "planman's Market Intelligence Newsletter" and just post away? You will find an audience that will chat with you if you can show you add value.

My strategy is described starting in this post: http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-65.html#post1787189 but the feedback was that it was too complicated for most folks.

My posts usually get about 1,000 views each, so somebody is reading them.

 

[planman]

I guess I will lead off with one of my trades last year hopefully others will add their successful trades and a little about how they found them. Last years home run was LMT spin off of LDOS. One of my favorite areas is to look for value in spin offs and special distributions. These type of investments are often mispriced and are too complicated and obscure for most individual investors. Finding these types of investment requires some unique research skills and the ability to find, read and understand SEC filings in an efficient and timely manner. For those willing to put in the work great rewards can be had as I was able to amass over 10,000 shares of LMT upon filing and received LDOS shares at an avg price of $33 share now over $50.

 

[Ready]

How do your returns over the past ten years compare to if you had put 100% of your money into Vanguard Total Stock Market Index for the same period?

 

[planman]

My special situation portfolio is up around 125% last three years with about 1/10 the standard deviation of the market. I have never used one strategy over any 10 year period as the inefficiencies that drive any strategy are fluid and depend on what part of the market cycle we are in. Special situations like spin offs and conversions have been a great fishing hole last three years. Back in 2009 buying an index may have made sense when P/E were 15 but buying an index at a 20-22 market P/E is a minefield I'm just not interested in crossing. I'm all about Alpha or risk adjusted return.

 

[copyright1997reloaded]

I like spinoff's. Post away!

A bit more detail. Companies like MAR and BAX have been awesome spin off generators.

MAR (Marriott International), spun off Host Marriott (Now Host Hotels, HST), Sodexho Marriott Services (which was eventually bought out), and recently Marriott Vacation Services (symbol VAC).

Baxter has spun off some great winners. For instance: Caremark in 1992 and was later bought by MedPartners and then eventually CVS. Allegiance in 1996, which split 2 for 1 in 1998, and then was acquired by Cardinial Health (CAH) in 1999. They also split out Edwards Life Sciences (EW) in 2000, which is up something like 20 times since then. Finally, they recently spun off BaxAlta, which was quickly gobbled up by Shire PLC.

In many of these cases, both the parent and the spun off entity do well.

 

[planman]

I did BAXALTA prior to LMT. BAX was a double header as you first got the spin off then you got to tender. Made about 30% if I recall. What broker are you using and do they let you do multiple odd lots ?

 

[planman]

REIT liquidations can be another good area to fish in anyone playing NYRT liquidation ?

 

[planman]

Closed end fund rollups and mergers another fishing hole any takers ? Love buying $1.00 of assets for 75 cents.

 

[planman]

Last but not least mutual conversions anyone playing the bank IPO game ?

 

[copyright1997reloaded]

I did BAXALTA prior to LMT. BAX was a double header as you first got the spin off then you got to tender. Made about 30% if I recall. What broker are you using and do they let you do multiple odd lots ?

I have several. I primarily use Ameritrade and Schwab. I am a long term shareholder of both BAX and MAR (back through the entire list I posted). One some of them I bought additional shares of the spin out.

It's interesting that some companies use this strategy which is the opposite of trying to have a conglomerate of somewhat dislike business (think GE prior to some of their recent changes) where the corporate entity essentially tries to do capital allocation. Instead, their approach is to concentrate on their core business, but also recognize that the management team of the 'other' business can also be better by having complete control over their capital and business.

 

[copyright1997reloaded]

Last but not least mutual conversions anyone playing the bank IPO game ?

Long ago. This used to be (and maybe again?) a great play. I knew someone who had deposits at hundreds and hundreds of Mutual savings banks, with the idea of getting stock if/when they went public.

These quite frequently worked out great. The rationale for buying is that the management of the bank (the officers) when going public have the opportunity themselves to buy at the offering. Since they also price the offering, they have incentive to ensure the offering price is 'reasonable' , i.e. quite low.

 

[copyright1997reloaded]

Here's a list I just found via google of some Mutual Savings Banks: US Nationwide Mutual Savings Bank List

They seem to be a dying breed.

 

[planman]

You are talking to one of those guys. Started in the game back in 1990. It runs hot and it runs cold depending on the market cycle. PM me where you live and maybe I can give you a few ideas.

GE and Buffett have a lot in common both use combination accounting to play with their numbers. Mergers usually happen when valuations are high and companies are looking to juice their numbers. Spinoffs and special distributions can release a lot of pent up value.

 

[Ready]

My special situation portfolio is up around 125% last three years with about 1/10 the standard deviation of the market. I have never used one strategy over any 10 year period as the inefficiencies that drive any strategy are fluid and depend on what part of the market cycle we are in. Special situations like spin offs and conversions have been a great fishing hole last three years. Back in 2009 buying an index may have made sense when P/E were 15 but buying an index at a 20-22 market P/E is a minefield I'm just not interested in crossing. I'm all about Alpha or risk adjusted return.

I don't understand your response. If you've been investing for at least ten years, you should be able to calculate your ten your return, and then compare it to a simple index. It should not matter that your strategy changes every three years. You are making the case that your strategy (or strategies) is/are better than investing in a simple market index fund. How can you conclude this to be so if you have not compared returns over a sufficiently long enough period of time to make this conclusion?

This is a similar argument that active managers try to make when they cherry pick a five year period where they beat the market, but ignore their sub-market returns over 10 and 20 year periods of time. Anyone can beat the market for a few years with a little luck and strategy. Nobody will argue with you about that. But whether any of this works long term is where many of us are going to be skeptical.

 

[planman]

I have managed to generate about 200K per year on a 2 million dollar portfolio for the last 15 years. My strategies are lower risk than the market and not comparable to index investing which requires that you accept a 1 year drawdown of up to 60% of portfolio value. However, all I do is trade full time for a living. I should also note that part of my portfolio back in 1997-2010 was invested in Chinese real estate, then in Florida Real Estate from 2010-2012.

I should also add that investing in an index is an active strategy as the indexes always change. S&P is cap weighted, DJ30 price weighted etc. so its a trading system but one that can cost you up to 60% of your portfolio in any one year if you believe in buy and hold. Unfortunately, most investors don't understand that if you take a 60% loss you need a 150% gain to break even !!!! Which is why those that held on in 2008-2009 did not break even until 2013 at the earliest.

 

[Fedup]

I think they do, that's why a lot of people are in cash. I wouldn't underestimate most investors.

 

[Boho]

New member Looking to start a ongoing thread where sophisticated investors can swap ideas about investment strategies like spin-offs, conversions, div capture strategies and market inefficiencies.

Welcome and thanks for joining the Beat Boho contest. I think my strategy is lower risk than the market too but I'm not sure enough to go all out with it in real life. I'm being more aggressive in the contest. I'm very inexperienced, my combined real-life and contest trade count is only about 10, but I'm behind on only one trade because the company was sued two days after I bought their stock. I'm very impressed with myself.

 

[samclem]

How do your returns over the past ten years compare to if you had put 100% of your money into Vanguard Total Stock Market Index for the same period?

For whatever reason, there are herds of great traders willing to tell anyone who will listen about how well they >did<. In one named portfolio. Looking forward or seeing the entire record somehow spoils the magic.
A trader who can really pick a high percentage of winners over time could use options/leverage to grow fabulously rich in short order. There are few instances of this.

 

[planman]

SAMCLEM I started the thread in the hope that we could trade ideas. I have no interest in telling you anything or anyone else anything if I get nothing in return.

I joined simulated investment game but unfortunately it does not accommodate anything other than a simple buy sell format.


Ill trade ideas via PM with anyone who has something of value to trade

 

[COcheesehead]

I think they do, that's why a lot of people are in cash. I wouldn't underestimate most investors.

Insert contrarian comment here.

 

[redduck]

SAMCLEM I started the thread in the hope that we could trade ideas. I have no interest in telling you anything or anyone else anything if I get nothing in return.

That's the spirit!!!

Ill trade ideas via PM with anyone who has something of value to trade

OK, now. Let's make a trade. I'll tell you what my favorite protein bar is and you tell me what your favorite protein bar is. But, I don't understand why this trade has to be via PM. It seems as if you don't you want samclem to know.

 

[planman]

With all do respect I think SAMCLEM may have had one to many protein bars

 

[redduck]

But how about addressing the question of trading ideas via PM's? What's the point of that?

 

[Gumby]

But how about addressing the question of trading ideas via PM's? What's the point of that?

Yes. Inquiring minds want to know.