Message-ID: <21707010.1075855662366.JavaMail.evans@thyme> Date: Fri, 11 May 2001 07:34:00 -0700 (PDT) From: sivy@listserv.pathfinder.com To: sivy@listserv.pathfinder.com Subject: Sivy on Stocks: Special situations Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Sivy On Stocks X-To: SIVY@LISTSERV.PATHFINDER.COM X-cc: X-bcc: X-Folder: \Peter_Keavey_Jun2001\Notes Folders\Notes inbox X-Origin: Keavey-P X-FileName: pkeavey.nsf SIVY ON STOCKS from money.com May 11, 2001 *****************[ A D V E R T I S E M E N T ]**************** Jump-start a child's College Fund with MONEY's $5000 QUICK CASH Sweepstakes! It's easy - just click the link below for your chance to enter to win $5000 Cash! Plus while you're at money.com, jumpstart your investments with a FREE Trial issue of MONEY! Click Here: http://www.money.com/scholarship ************************************************************** Special situations These tips for identifying investment opportunities will help you find stocks that can move up even when the stock market is flat on its back. By Michael Sivy As long-time readers of this column know, I like to focus mainly on the biggest, most financially healthy companies. Such blue-chip growth stocks are well-followed by Wall Street analysts and by the media, so their prospects are generally reflected in the share price. Occasionally, however, those stocks get undervalued -- but they generally return to fair valuations within a few years. If you buy them when they're down, odds are you'll at least match -- and probably slightly outpace -- the general market over a decade or longer. (For a list of the stocks I think are most worth tracking, see the Sivy 100.) [ http://www.money.com/sivy100/ ] There are, however, smart ways to enhance that basic strategy. Some investors, for example, search for so-called "special situations," stocks that will rise or fall based on unique events, like a takeover bid or a corporate restructuring. Anticipating such events takes some savvy, but there are guideposts that can help. One excellent source for those tips is The Superstock Investor, a new book by Charles LaLoggia and Cherrie Mahon, published by McGraw Hill. I've known Charlie for more than a decade and he's spotted a lot of great opportunities, particularly among midcap and smaller stocks that aren't well followed by analysts. In fact, I featured one of his recommendations in Sivy on Stocks last November 8 -- United Industrial [UIC], a small defense-related company with little debt. Since then, the stock has risen 40 percent to $16 a share. Since every special situation is different, the best way to learn about them is to read through a lot of case studies -- and Charlie's book is full of them. But he also lists a number of signs to watch for that can help you identify a stock poised for big gains. The most important thing to remember is that a special situation needs a catalyst that can unlock its value. Here are 10 potential triggers: * An outside investor files a 13-D form with the Securities and Exchange Commission, revealing that it has accumulated more than 5 percent of a company's stock. * A company with one outsider that owns more than 5 percent of the stock attracts other investors who buy big stakes. * An outside owner announces that it is seeking ways to enhance shareholder value or expresses an interest in selling its stake. * A dispute about the best way to get the stock price up breaks out between a company's management and a major outside shareholder. * A company with one or more large outside owners announces a stock buyback program, giving more influence to the biggest shareholders who will push to get the stock price up. * A company in a consolidating industry sells or spins off non-core assets, thereby turning itself into a pure play that is likely to be even more attractive to potential acquirers. * A company in a consolidating industry announces a restructuring charge that causes its share price to decline substantially, making the stock highly attractive to potential acquirers. * A company in a consolidating industry is partially owned by a brokerage or buyout firm that could devise a strategy to boost the value of its stake. * The founder of a company who owns more than 10 percent of the stock passes away, removing potential opposition to an acquisition. * A company that owns a stake in another company is itself acquired, leading the acquirer to try to raise cash by selling the stake and putting the company in play. None of these factors by itself is a reason to invest in a company. But if the stock is attractive on fundamental grounds, the chance that it will turn out to be a special situation provides an enormous kicker. ### Post your comments on Michael's column at: http://www.money.com/depts/investing/sivy/index.html To subscribe or unsubscribe to Sivy on Stocks, go to: http://www.money.com/email/ ----------------------------------------------------------- CONTACT THE BIGGEST COMPANIES IN THE WORLD! Over 5,000 contact names in the OFFICIAL FORTUNE Databases. DOWNLOAD THEM NOW! http://www.fortune.com/sitelets/datastore/index.html?mn01 ----------------------------------------------------------- * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Special Internet Offer!!! 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