New Issue of Downside Protection Report: Our Two Top Picks This Month
The following is an excerpt from the editor's commentary contained in the new issue of Downside Protection Report, the monthly newsletter that is setting a new standard in idea generation for serious investors. To read the full report, start your free 30-day trial now.
Dear Fellow Idea Seekers,
In this issue, we bring you two vastly different opportunities—one is a “buy-and-forget” investment suitable for investors with a long-term time horizon. The other is a hands-on trade that requires close monitoring and has a time horizon measured in months. While we typically avoid situations such as the latter because they generate short-term taxable gains and incur large trading costs, we will occasionally bring you such opportunities if we find them compelling.
The long-term purchase we’re making is [NAME OF COMPANY A -- available with free trial], a conservative investment firm based in Dallas, Texas. Over the past few decades, [COMPANY A]’s portfolio has beaten the market while exhibiting below-average risk of permanent loss. The firm has picked winners and held onto them for a long time—sometimes for decades—thereby minimizing the drag of capital gains taxes. [COMPANY A] owns large stakes in investee companies and typically controls corporate decision making, enabling it to extract maximum value for shareholders. The company has a reputation for conservatively stating—or even understating—the value of its portfolio. With shares trading at a historically wide discount of 36% to stated value, they offer strong downside protection and appreciation potential.
Our favorite low-downside trade this month involves the simultaneous buying and selling short of the Class A and Class B shares, respectively, of [COMPANY B], a provider of insurance claims management services. As the recommended trade eliminates our exposure to the business of [COMPANY B], the only two factors that truly matter are the price spread between the Class A and B shares and the risk that management will advantage Class B shareholders at the expense of Class A shareholders (this risk is negligible, in our view). With the Class A and B shares trading at $5.53 and $8.42, respectively, we find the spread wide enough to generate meaningful profit potential at low risk.
In the previous two issues of Downside Protection Report, we highlighted Greenlight Capital Re (Nasdaq: GLRE), [COMPANY C] and Microsoft (Nasdaq: MSFT). Microsoft lowered its outlook following our write-up, but the shares have barely budged since we recommended them, attesting to the downside protection afforded by Microsoft’s historically low trading multiples. Meanwhile, Greenlight Re and [COMPANY C] are already generating meaningful outperformance versus the S&P 500. We continue to like all three companies.
Read the new issue of Downside Protection Report and gain access to past reports and interviews when you start your 30-day free trial.
Disclosure: DOWNSIDE PROTECTION REPORT is published monthly by BeyondProxy LLC, P.O. Box 1375, New York, NY 10150. Website: www.manualofideas.com. Email: support@manualofideas.com. Please email or call if you have any subscription questions. Managing Editor: John Mihaljevic. Subscription $149 per year. © Copyright 2008 by BeyondProxy LLC. All rights reserved. Photocopying, reproduction, quotation, or redistribution of any kind is strictly prohibited without written permission from the publisher. This newsletter bases recommendations and forecasts on techniques and sources believed to be reliable in the past and cannot guarantee future accuracy and results. BeyondProxy’s officers, directors, employees and/or principals (collectively “Related Persons”) may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated in this newsletter. John Mihaljevic, Chairman of BeyondProxy, is also a principal of Mihaljevic Capital Management LLC (“MCM”), which serves as the general partner of a private investment partnership. MCM may purchase or sell securities and financial instruments discussed in this newsletter on behalf of the investment partnership or other accounts it manages. It is the policy of MCM and all Related Persons to allow a full trading day to elapse after the publication of this newsletter before purchases or sales of any securities or financial instruments discussed herein are made. Use of this newsletter and its content is governed by the Terms of Use described in detail at www.manualofideas.com/terms.html.