Special Situations – What are they?
Posted on | August 19, 2009 | No Comments
Special Situations, or Workouts as Warren Buffett likes to call them are what they sound like, out of the ordinary situations for a stock that may be profitable to a savvy investor. Joel Greenblatt wrote You can be stock Market Genius, which specifically discusses special situations. Special situations include such tactics as buying spin-offs, securities in bankrupt companies, rights offerings, re-caps, odd lot purchases. Not all of these are appropriate for Beginning or small time investors or beginning investors. I will highlight a few of the special situations that are worth looking at over the next day or two.
Odd lots- Yesterday’s post about Zareba Systems (ZRBA) is an odd lot purchase. When a company wants to consolidate its shareholder base for reasons that are often related to reporting and expenses relating to satisfying the SEC, a company may choose to have a reverse split. In the case of Zareba Systems the reverse split is 250 for 1 share. An investor purchase one share less than the split so they are paid in cash at a premium to existing market price. This is a relatively low risk proposition, often with some relatively good return on investment. But very little capital can be employed in this way. The Zareba Systems opportunity is probably on the upper end of what you can expect to invest.
Tomorrow Special Situations continured.
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