1. After
purchasing six to eight stocks in different industries, the benefit of adding
even more stocks to your portfolio in an effort to decrease risk is small.
2. Overall
market risk will not be eliminated merely by adding more stocks to your
portfolio.
Chapter 2
- Do your own work.
- Don’t trust anyone over thirty.
- Don’t trust anyone thirty or under.
- Pick your spots.
- Don’t buy more stocks; put money in the bank.
- Look down, not up.
- There’s more than one road to investment heaven.
Chapter 3
- Spin-offs, in general, beat
the market.
- Picking your spots, within the spin-off universe, can result in even better results than the average spin-off.
- Certain characteristics point to an exceptional spin-off opportunity:
i.
Institutions don’t want the spin-off (and not because
of the investment merits).
ii.
Insiders want the spin-off.
iii.
A previously hidden investment opportunity is uncovered
by the spin-off transaction (e.g., a cheap stock, a great business, a leveraged
risk/reward situation).
- You can locate and analyze new spin-off prospects by reading the business press and following up with SEC filings.
- Paying attention to “parents” can pay off handsomely.
- Partial spin-offs and rights offerings create unique investment opportunities.
- Oh, yes. Keep an eye on the insiders.
Chapter 4
- Risk arbitrage – NO!
- Merger securities – YES!
Chapter 5
- Bankruptcy – some points to remember
i.
Bankruptcies can create unique investment opportunities
– but be choosy.
ii.
As a general rule, don’t buy the common stock of a
bankrupt company.
iii.
The bonds, bank debt, and trade claims of bankrupt
companies can make attractive investments – but first – quit your day job.
iv.
Searching among newly issued stocks of companies emerging from
bankruptcy can be worthwhile; just like spin-offs and merger securities;
bargains are often created by anxious sellers who never wanted the stuff in the
first place.
v.
Unless the price is irresistible, invest in companies
with attractive businesses – or as Damon Runyon put it, “It may be that the
race is not always to the swift nor the battle to the strong – but that is the
way to bet.”
- Selling Tips
i.
Trade the bad ones; invest in the good ones.
- Restructuring
i.
Tremendous values can be uncovered through corporate restructurings.
ii.
Look for situations that have limited downside, an
attractive business to restructure around, and a well-incentivized management
team.
iii.
In potential
restructuring situations, also look for a catalyst to set things in motion.
iv.
Make sure the magnitude of the restructuring is
significant relative to the size of the total company.
v.
Listen to your spouse.
(Following this advice won’t guarantee capital gains, but the dividends
are a sure thing.)
Chapter 6
1. Stub Stocks. There is almost no other area of the stock
market where research and careful analysis can be rewarded as quickly and as
generously.
2. LEAPS. There is almost no other area of the stock
market (with the possible exception of stub stocks) where research and careful
analysis can be rewarded as quickly and as generously.
3. Warrants and Special Situation
Option Investing. There is almost
no other area of the stock market (with the possible exception of stub stocks
and LEAPS) where research and careful analysis can be rewarded as quickly and
as generously.
