SPECIAL SITUATION INVESTMENTS
Shortened Time Frame Of Results
The yields for Special Situation investments are usually higher than for long term strategic capital investments. Risk factors also increase with these types of investments. The keys are timing, details revealed by research of related businesses and suppliers, and an overall evaluation of the situation. One thing is usually certain, and that is the shortened time frame of results. By sequencing or if available, overlapping several opportunities, the aggregate yield can excel beyond more common paths of investment.
A stock may be undervalued and is expected to rise due to an imminent turn of favourable events.
Stock that fluctuates significantly in daily trading. In this case it is important to understand the reasons for the heavy trading and fluctuations, and see if surrounding factors point to a favourable end gain. If a damping factor occurs in the fluctuation time frame, a settling point may temporarily occur leading to additional opportunity for an undervalued situation. Another factor is whether the fluctuation has crossed the threshold to become reported and market aware. The Cobalt Capital team of researchers use fast response time and look at many factors to fully qualify a special opportunity.
Fundamental analysis to determine the company’s position in the market and recent announcements.
Follow-up research to supplier companies and affiliates to see if related announcements have been made such as pending orders or increased demand. An alternate catalyst for creating a special investment would be news of orders on hold creating a temporary negative market perception and a depressed and undervalued stock price.
Bad news temporarily depressing a stocks value with an anticipated upswing.
Surrounding factors in the economy or market segment indirectly affecting market performance. Is the company positioned to weather the storm and emerge prepared to take advantage of newly freed investment money?
News of change in management or takeover bids. What effect will these changes have once they are completed?
Transactions inside the company by officers. This insider trading on the open market is required by law to be disclosed to SEC. Such actions may signal imminent change in a companies operation and may by its nature trigger increase or decreases in value.
Viewed over time and relative to industry averages for growth, is the company ahead of growth, pushing the industry envelope, but perhaps behind in profits causing depressed value, all the while poising itself for an eventual recovery and dominant position?
Discussions with management to determine in more detail and with greater understanding the current position.
A review of liabilities and collateral backing to evaluate the downside risk. Once the various factors have been determined and their relationship and timing to industry trends for the anticipated time for positive returns are understood, the Special Situation investment is announced to participating customers in this area of opportunity.