Those looking into some catalyst might want to ponder over these names for the week. I have done research on few of them, the other I have read online, on Barron’s and other publications. These are def. is worth a serious look.
Hess Corporation(HES) – This firm might present a good opportunity for investors looking to benefit from two definite catalysts – ongoing divestitures and shareholder activism by Elliott Associates.
On 4-Mar-13, in a press release, HES outlined several initiatives; to transformation HES into a pure play exploration and production (E&P) company after divesting upstream and downstream assets . Part of this initiative is also to increase the dividend to USD 1.00 per share, an increase of 120% and to buyback USD 4bn of stock (16% of HES market cap), dependent on asset sales. HES has already divested certain assets to date, which includes ones in Eagle Ford for USD 265m, its ACG fields USD 1.0bn and its Russian subsidiary, Samara-Nafta, to OAO Lukoil for USD 2.05bn.
However, this announcement comes after Elliott filed with the SEC on 29-Jan-13, asking for nomination of its own 5 directors and for the breakup for the company after divesting HES’s downstream and midstream assets. A detailed plan with the SEC on 13-Mar-13, in which Elliott values downstream and midstream assets at USD 3bn-3.5bn and USD 2bn-2.5bn respectively. It also calculates that value of HES shares to be between USD 97 to USD 128 per share, a substantial premium to where they trade today, at USD 71.00. The value realization is possible, if HES executes on Elliott’s plan to breakup of HES into two entities, divest assets and gain operational efficieny.
However, HES has refused to breakup the company and instead has decided to follow its own course of action. HES’s future will be decided at the AGM which will be held on 16-May-13. Shareholders can chose to either vote for Elliott’s directors, paving the way for a breakup of the firm, or they can vote for HES’s nominees and stay with the current plan leading to a pure play transformation, an increased dividend and USD 4.0bn share buyback plan. No matter what the outcome, this seems like a good trade with a definite catalyst for investors looking to trade energy names.
Valero Energy (VLO) - Continuing with the energy theme, this is another name worth a serious look. Valero Energy (VLO) that said it will spin off its retail operations.
Nabors Industries (NBR): I wrote about Nabors Energy on my Seeking Alpha blog a while ago. Here is the link to the writeup - Nabors(NBR) . Recently it was reported that NBR’s biggest shareholder convinced the management and thereby got the right to up its stake just below 15% in the company. NBR has also agreed to additional board appointments and what’s more important is that the firm has agreed to undertake a strategic review of the company. The poison pill NBR had expires in July 2013. Firm was rumored to be a takeout candidate. Its actively looking into and is divesting assets and restructured its operation in 2012. Recent DB research note suggests the firm’s fair value at USD 25 per share – which was my best case scenario. My base case was $18.00 a share, still 14% above where it trades today.
Brookfield Property Partners(BPY) – BPY is suppose to be spun-off from from Brookfield Asset Management (BAM) on 15-Apr-13, and will contain BAM’s commercial real estate holdings, to become one of the world’s largest property companies. What makes this opportunity interesting is BAM’s history of successful spin-off in the past. For example, shares of Brookfield Infrastructure Partners (BIP), in which BAM owns 28%, have doubled since they began trading in 2008. Additionally, BAM owns 68% of Brookfield Renewable Energy Partners (BRPFF), whose stock is up 260% since early 2001. On 15-Apr-13, BAM plans to distribute 7.5% of BPY to BAM shareholders of record March 26 in the form of a tax-free special dividend of one BPY unit for each 17.42 BAM shares held. BPY is targeting a distribution growth-rate target of 3% to 5% annually and expects to pay USD 1 per unit annually which will yield 4.7%. BPY is suppose to benefit from a recovering U.S. economy, and further expansion into Brazil and Europe will drive growth. The firm according to some in the industry should be valued at USD 30 a share.
On a Personal Note: I think its always good news, when you make money and help people make some too! My SLE spin-off, DE Master Blender got an offer at a 33% premium to its trading price. My HSH is up 30% and I am long DELL LEAPS, which have made money for me so far. Last long I wrote about was Gentex (GNTX) – I believe it’s worth another look for those looking at investing in decent firms. Also, a recent short I wrote is something I believe people should keep on their radar. It was on NetSuite (N)
I personally expected volatility in this month and going forward and believe there will be better opportunities to buy. However, its hard to fight so much liquidity getting pumped into the market, helping the market move higher without strong underlying fundamental. I think the coming times will be a feast for special situation investors! Stay tuned!