Tuesday, March 28, 2017

Shook Those STTs

Buying a stock I've previously owned is usually a lot of fun. I save time on research since I know the company already, and I get a psychological kick from knowing that I made a good decision to sell, since the price has come back down. Such was the case with STT Enviro, a repeat stock I talked about on this site about 1.5 years ago.

Yesterday, STT announced that it was being bought out at a solid premium to its previous price. This is bittersweet for me, because while I love the quick gain, I hate to see such a volatile stock for a (usually) cash-rich and profitable company disappear from the opportunity set. This is a stock that would routinely lose/gain half its price in a given year. Barely a month ago, it traded for less than 1/3 of the takeout price!

This is not a perfect company by any stretch, which may be why its price is so volatile. It's cyclical, for one thing. And for another, there have been some management shenanigans: private placements at discounts to market while cash balances were high, shareholder loans to executives, and stock option expiry extensions, just off the top of my head. But at the right price I'm willing to overlook such behaviour, while I suspect some investors aren't.

The challenge now is finding a replacement in my portfolio. Any suggestions?

Disclosure: No position

5 comments:

Anonymous said...

IPC.V

Pedro Salomao said...

Try these:
-Texwinca (almost 50% of market cap is excess cash): really cheap right now
- Fibra Hotel/ Fibra Inn (mexico REIT, hotels, great price at less than replacement cost). As hotel occupancy rise and rates rise and the peso appreciates, it will be a TIMES 3 return on the investment
- CNTE: coal at 4x EBITDA
- SMFG/ MFG: japanese banks at 8x Earnings. Global inflation pick up trade will catapult these higher. Higher earnings and higher multiples.
- Also like gazprom at 4x Earnings. Lots of risk built in but none should materialize.
Would gladly talk to you about these. Best regards and thanks for a great blog,

Pedro

juan said...

BEBE: It's retail, and fashion, so risky. And they have leases. But at $3.7 it looked cheap. Lloyd Miller III owns a chunk. The company might be looking to go online fully, and to negotiate remaining lease payments with landlords: http://www.businesswire.com/news/home/20170322006268/en/

juan said...

You might also want to take a look at Regency Affiliates (RAFI). In this presentation the company does the valuation for us: http://www.regencyaffiliates.com/presentations.html

Some of the numbers in that valuation might be a bit optimistic, but not crazily so, in my view.

FrankieKTLam said...

RAIL looks interesting at current price

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