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Make 25% in 2 Months with this Special Situation
Posted by: Jae Jun (IP Logged)
Date: March 19, 2014 08:22AM
Here’s an obvious question.
You want to make money in the stock market right?
So far in the first 3 months of this year, I’m already involved in 2 special situations to boost my portfolio returns.
If I calculate the time spent on each deal with the expected profit across my 3 accounts, it ‘s more than $200+/hour.
And if you followed my tutorial on setting up the Value Investor’s Google Alerts to automate the process of finding these deals, you know which special situation I’m going talk about.
25% in 2 Months with Global Sources (GSOL)
Here are the details.
I post special situations as I find them on the forum. It’s quick, informal and I can have a discussion about the validity of the workout before announcing it officially. If you want to get in early with whatever I’m finding, make sure to check the value forums.
Here’s a nicely researched piece of the GSOL special situation on Seeking Alpha. Sums up everything nicely.
Digging Deeper to Know What You Are Getting Into
You can look up what the company does, but I’m quite familiar with GSOL personally.
I’ve used them before. I used to play the ebay arbitrage game of sourcing products for cheap from China and then flipping it. Global Sources was a good place to get ideas.
More importantly, the company is legitimate and not a reverse Chinese merger company. In other words, it’s ok to participate in this.
Back in 2010, GSOL completed a tender offer just like this. It’s nothing new to them.
The only caveat is that GSOL will be spending only half the amount they spent 4 years ago and I fully expect more shares to be tendered than the original 5m.
Here’s what happened in 2010.
Here’s how I’m thinking about this.
Why an Odd Lot?
(For an odd-lot definition, check this investopedia link)
There is no mention of odd-lot provisions in the press release, but like I said, I’m expecting this deal to be oversubscribed. And if it plays out like it did in 2010, odd lot holders will get priority and have their shares tendered.
If you buy too many shares hoping to make a quick and easy 25% return, think again. You’re going to end up holding shares instead of cash.
I bought 99 shares for each of my accounts because I don’t want to hold any GSOL shares. The standard odd lot size is under 100 shares but it’s up to the company to define what the odd lot actually is.
Got a tip from a reader that GSOL defined an odd lot as 50 shares in 2010.
I always buy 99 shares but buying 50 or less isn’t worth it.
Even if GSOL looks like a value play, I don’t want to hold any shares purely for portfolio sizing reasons so all I can do is hope that the odd lot size isn’t 50.
Here’s Your Profit Table
GSOL Special Situation Profit Table
I was able to get in at $7.80 for two of my accounts and $8.00 for the other.
I’ve read where some people have about 30-40 accounts just for special situations and by having so many accounts, profits are maximized.
e.g. instead of just doing one workout and making $200, multiply that by 30 and your total profit becomes $6k.
This is an extreme case, but interesting there are people doing it.
Make 25% in 2 Months
Get the odd lot and make 25% in 2 months for a very low risk investment. These special situations is one of the best way to boost your returns in a volatile and sideways market.
Stocks Discussed: GSOL,