Bid targets can make for attractive investments if you manage to spot them early on!
Readers may remember that such was the case with Belmond Group, the luxury hotel operator that I wrote about in my free Weekly Dispatches on 28 November 2018. In amidst my far-flung network, I had picked up credible industry chatter that an expected bid was going to come in at a much higher level than the USD 2bn that were believed to represent the very upper ceiling at that point.
Just two weeks later, a USD 2.6bn bid came in, yielding those of my readers who had bought into this opportunity a quick 34% profit.
Outside of blowing my own trumpet, I am citing this because it's a fascinating case study that belies the entire "Efficient Market Theory" that academics like to quote. Those who claim that everything that is known (by at least some market participants) is priced into stock prices already are quite simply wrong. The exception proves the rule.
This was all the more remarkable given that this wasn't an illiquid small-cap company, but a multi-billion, internationally-known company.
In other words: Yes, you can be ahead of the market. Armed with the right kind of information, you can beat the Big Guys and earn handsome amounts of money.
How to spot takeover targets and what to avoid
The ingredients for success are relatively easy to list:
- A trained gut feeling to make sense of contextual information, such as changes to the competitive landscape of a sector. This helps you identify potential targets.
- Logic to take apart corporate accounts. With this skill, you can determine whether your potential bid targets also make for good investments.
- Ideally, a far-flung network so that you can ask people in that same sector about their view of your assessment. Nothing beats getting the "inside view" of an industry.
Besides, it also helps to have a bit of luck.
It's also not too complicated to define what you want to avoid. E.g., timing and valuations are critical:
- You don't want to buy into a company where it subsequently takes years and years before anyone makes a bid. Your analysis needs to yield that for particular reasons, a bid is likely in the foreseeable future.
- You'll need to be pretty sure that as and when a bid is made, it offers a sufficiently high upside compared to the price you’ve paid. That's what you deal with by taking apart the accounts and speaking to people in that same industry.
- Last but certainly not least, you'll want good fundamentals to ensure you don't face a massive downside in case the anticipated bid doesn't happen for whatever reason. Considering carefully what the investment's downside amounts to protects you against the unforeseen.
Overall, I'd say it's more of an art than a science. If it were easy, you wouldn't need someone like myself to spend most of their time sitting on a remote, sparsely inhabited island with plenty of time to think about finding the next target, and burning the midnight oil to take its details to pieces.
Luckily though, this is precisely what I am doing for the growing community of paying Members of my website.
My latest extensive research report is out now
I have just published a 30-page report about a company that I believe will basically be a repeat of what we achieved with Belmond Group last year.
- EUR 2bn market cap, i.e., liquid enough to easily buy and sell the shares that are listed on several major European stock exchanges.
- Lots of official indications that a bid is coming, and (crucially!) some unofficial sector intel that I’ve gathered during a trip to the city where the company is headquartered.
- The prospect of making anywhere from 31% to 69% if a bid is made, which I deem likely during the next 12-18 months and with luck a lot sooner.
With the report I sent to my site's Members earlier today, I am confident there is a new, attractive case for placing a bet on a coming takeover bid. It has ample upside, a reasonably clear time horizon, and what I deem to be a limited downside.
This is the fourth such research report I have published this year, out of the ten that I have promised my readers over twelve months. To read them all is a mere $49 a year, which probably makes it the cheapest such service in the world.
In my free Weekly Dispatches, which you are a registered reader of, I'll continue to feature interesting investments. The very best investments that cross my path, however, will only be featured in the ‘Reports’ section that is password protected and limited to paying Members of the website.
Just one more thing
I also have other bloggers and vloggers among my readers. Over the coming months, I'll be starting a few collaborations with them. The first one is already up and running, which is why I wanted to make you aware of the following two aspects:
1: Videos with Jens Rabe
My old friend and reader Jens Rabe is not only Germany's leading expert for option strategies, but he also publishes a fast-growing vlog on YouTube. We have teamed up to produce one video a month where Jens and I will be talking about investments and related aspects.
The kick-off video was a 45-minute talk show. The next ones will tend to be 7-20 minutes in length, and the first one of those is also just about to go live.
2: Last and final copies of my two books
In 2006 and 2007, respectively, I published two books in German. The video I posted with Jens Rabe led to some new interest in them. One of them jumped to the #1 bestseller spot on Amazon Germany in the Investment Fund section – talk of a much-delayed 15 Minutes of Fame!
The publisher tells me there are now only 40 copies left of each one of these books. They are long out of date in many aspects, but it appears that some people still enjoy reading them. If you'd like a copy, do it soon because once the final copies are gone, it will never be reprinted.
Also, I had kept a dozen copies of the "Special Editions" that a master bookbinder produced for me at the time. These were limited editions of 100 copies each.
2006: I had this book bound in leather that sunk on a ship off the coast of England in 1786, and which wreck divers discovered and salvaged in the 1980s. This is probably the world's rarest leather. The entire book is a handmade piece of art. There are now four copies left, which I have listed on Amazon.de.
2007: The second book I had bound in "Suzani" textiles from Central Asia. These late 19th/early 20th century, handmade textiles required a special permit to export from Uzbekistan. Again, each book is a unique piece of art, and every detail was crafted by specialists. I now have ONE copy left which is also listed on Amazon.de.
Eventually, I'll write a new book, and this will then appear in both German and English. In the meantime, I wanted to have at least mentioned these old treasures to my current readers. During the past few days, five of the ten Special Editions that I had left have found a new home. I expect the remaining five to be gone soon. Collectors' items for those who fancy owning them.
Stay tuned for more
After so much talking up my own products, it's back to the research desk for myself.
I have a whole number of stocks and investment themes that I am keen to tell you about during the coming weeks.
The next regular Weekly Dispatch is due out next week, and I'll send it to you while travelling within South America.
Until then - best regards!
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