Interesting article, thanks for posting. Assuming that his numbers are correct, I certainly like the idea of buying some shares ahead of the spin-off in a vacuum.

This worries me a little bit: "The company is exposed to the global auto market as well as the market for heavy mining and construction equipment, and slowdowns in those sectors have had an impact and will continue to do so."

I haven't followed this super closely, but from what I understand the global shipping industry hasn't been doing so hot lately and there's a lot of risk, given the uncertainty around China. Investing in a company where a chunk of their revenue is dependent on shipping heavy mining and construction equipment seems risky. But again, if his numbers are right, the company would be dirt cheap and it would be reasonable to expect a bounce, assuming there's no huge meltdown.

"I view the company’s $200 million provision as exceedingly conservative, as future penalties will arrive piecemeal and over the course of many years. Courts don’t move quickly. The value of potential anti-trust liabilities in both absolute and present value terms is likely far less than $200 million."

Do you have any idea what the background / timeline is on this anti-trust suit? He didn't really go into detail on his post. Also, I'm not sure why he thinks that $200 million is exceedingly conservative. I don't know that he's wrong, but he didn't post much analysis and the guy's not an attorney. Is $200 million really overly conservative for a company with $2.3 billion in revenue? Of course, if the game plan is just to buy a bit ahead of the spin-off and hold for a couple months, I'm not sure how much the lawsuit matters, given that they've already accrued for it and court cases take forever.

And here's a stupid question: This is only listed on the Oslo stock exchange, right? Do you have to call your broker to place an order? I'm not sure how that works since I've really only invested in US and Canadian companies.

Haven't done any work on it myself, just something i read that i thought the logic was good and looked like a set up where a mispricing is very likely to occur.

I think the parent WWI NO is a better deal as you are getting WMS stub for negative. That being said, all the businesses they are in seem to be very early stage in the economic cycle and I've been burned too many times by buying anything that seems extremely cheap ahead of a slowdown.

I thought about it more and don't know what putting Hyundai Glovis shares in treasure co really does since if you liked the stub price you could've shorted it out anyways unless I'm missing things. I've only looked at the last quarter results and presentation so I could be wrong on these things...

Posted by mynameiskarl:

Hi guys, kind of new to the game and not sure were to post this... but this thread seems to have some smart, "value" minded people. Gonna pitch an idea that's hopefully interesting and maybe you can teach me how to evaluate this.

Greatbatch (GB) just completed a spinoff of Nuvectra (NVTR).

Recently read Greenblatts "You can be a stock market genius" which pays special attention to spinoffs and shareholders dumping the unwanted stock. Seems like this could be the case with a 1B company spinning off a 40M one.

(http://www.stockspinoffs.com/2016/03...unges-no-news/)

Currently trading at a market cap of about 40M. So looks pretty good.

Form 10 can be found here: http://www.sec.gov/Archives/edgar/da...4014dex991.htm

Greenblatt talks about looking at executive compensation and seems like CEO and CFO are getting 2% en 1% "of the number of shares of Nuvectra common stock outstanding immediately following the completion of the spin-off", which should be good.

But seem like they expect to burn some cash and not immeadiately make any profit?

This is the first time I opened one of these forms, so you guys have some good pointers, lemme know

Thanks for moving this, ahnuld.

(Posted in the wrong thread, couldn't edit my post)

wow from $11 to $4 in a blink for NVTR. Something not kosher about how all that went down. But yeah there must be an opportunity in here somewhere now.

Ahnuld since you're very active on the TSX, have you been following what's going on with Concordia? Was digesting this this morning, really makes me want to take a long position before earnings. As much as I wouldn't touch VRX, I feel Concordia is just being made guilty by association. Seems like a deep value play:

http://seekingalpha.com/article/3959...ty-association

tons and tons of debt though.

I know they still have to execute on it, but they've publicly said their aim is to reduce the debt-to-EBITDA ratio to 5.5 times (or possibly less) this year. I guess part of the bet of buying here is believing they can do it.

^ I own Concordia and it's not fun. It trades with VRX now and has had multiple -10% days for no reason other than the market treats it as "valeant junior" even though their businesses are completely different.

Ya I'm certainly not suggesting one should buy it Monday. But I am saying that precisely because it's getting sucked down by Valeant is why one might want to eventually own it. It's getting blown up almost purely by fear/association.

The comments section isolates a generic drug market they have cornered and where they have begun price gouging.

Ya wow the comments section may be as good or better than the article itself

honestly if I was dealing with concordia I would look at ebitda contribution from each drug, see when they go generic, and approach it as as a sum of the parts build up. Debt ebitda at 5.5 is still crazy high if a bunch of your main earners are going generic in a year or two. means all cash flows accrue to debt holders. Just do a run down assuming they dont do more deals and run current portfolio down over next few years and reduce debt to 2x. See what cash flow is at that time frame.

Went and bought NVTR at 4.50 and set a sell for 5.25 on the off chance it went nuts, and the sell order filled while I was out. Lol now I'm not so sure that I'm happy to have sold.

Greenblatt's book is a good one, but be aware that a lot of funds focus on these situations so really need to look at each spin-off individually

The main thing to be aware of is a lot of funds have size/price requirements. If I remember correctly, Greenblatt mentions that funds will sell off the spin-off because it's unrelated to the main company (and the industry focus of that fund). I can't remember if he touches on the size aspect, but in this case, a micro-cap stock with a $50mm market cap is going to be well below the valuation parameters of many funds so they are automatically going to have to dump it. And likewise, it'll be too small for new funds to come in (at least immediately).

A technical trader could probably trade the swings from it getting oversold right after the spin off, but as a value investor I'd be cautious. It's all going to depend on how the launch goes for this new product they have coming. Unless you know something about this space, I'd be cautious about jumping in until they start showing some traction on sales.

Saying they are completely different is a stretch

"Concordia operates a healthcare business that includes the management and acquisition of legacy pharmaceutical products and acquires and develops orphan drugs both with patent life and exclusivity remaining (pre-legacy), and products that have reached full maturity but continue on a predictable revenue generation path, collectively referred to as legacy products. Regardless of stage of the life cycle the targeted products have a well-established record of safety and efficacy and a history of stable, predictable prescription demand"

The legacy products part is very much what VRX does. Maybe the end markets are different but this is effectively their core strategy, with a few other elements thrown in.

anyone got tips for valuing E&P companies efficiently? it becomes pretty frustrating comparing different companies metrics as they all report numbers differently to an extent.
metrics i'm using are EV/proved reservers, EV/BOED / netbacks, etc...

ev/cashflow. Ive learned the ev/boed metric is somewhat irrelevant as netbacks can varily widely.

also want good recycle ratios. Pretty much you want clr but if they didnt have so much debt

hey thanks for the reply ahnuld
isnt that the point with netbacks is that they very company to company. whoever has higher netbacks would be more attractive? or do you mean the way they report their netbacks vary widely?
ya recycle ratios are another important one that I've learned, but frustratingly not everyone lists those.
I'd love to hear what about CLR you like. I've read a few articles on them but I'm not entirely familiar.
bonus question would be if you would care to divulge any small/midcap E&P canadian names that you like? so far I own some BTE but I'm looking at WCP also. looked a bit at BXE as well but not thrilled with the prospects for Natgas.
thanks!

Does anyone here know of any good resources (blogs/websites) that discuss opportunities in distressed debt?

Bizarre:

HOS
EV/EBITDA: 5.6
Short Interest: 32.4%

TDW
EV/EBITDA 6.9
Short Interest: 16.7%

GLF
EV/EBITDA 15.1
Short Interest: 22%

So you have 3 companies that are very close to the same in terms of a business, and the one with the best cash to debt position and best EV/EBITDA is by far the most shorted, and the one in the most dire straits is trading at the highest multiple with less short interest.

Is this just blatantly terrible pricing or what am I missing here?

http://www.kimmeridgeenergy.com/Kimm...WinnersWin.pdf

thought this was a concise and informative piece on valuing E&Ps. stressed recycle ratios were the most important factor to consider.

nope, but thanks for trying