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Joel Greenblatt on Special Situations: In-Depth Class Notes


indythinker85

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  • 3 weeks later...
  • 3 years later...

A special situation that I like right now (altough mr. Greenblatt may not approve since it's merger arbitrage) is GNW. At the time of announcement of the sale of its business, the market valued its operations at $5.50 per share (and on an upward trend). But the company announced a sale at $5.25 - below the market value at the time. The share price cratered pretty hard to create a synthetic spread. The company's operations improved drastically in the past couple quarters, since the original announcement, which has also not been reflected in the share price.

 

So you flip a coin where you earn a 60% spread if the merger ends up closing, or about as much if it doesn't and the market value rerates back to what it was (possibly more, given the improvement in results). Nobody wants to touch it because it's a big huge insurance black box with tons of moving parts, and they are selling to a Chinese company to boot. Thing is, the market already told you what it is willing pay for the business without a merger in place, and that is your downside...

 

You can be a stock market genius was by far my favorite book on investing, and I wish he'd put out more books of his battle stories.

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