Special Situation Investing
Channel: Ishfaaq Peerally
Date: 2021-11-10

What is special situation investing? 

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⭕ Today's video is about:

0:00 Intro
1:04 What is Special Situation Investing
2:05 Arbitrage
4:20 Liquidation 
6:36 Debt Restructuring
10:06 Special Issues
11:19 Why invest in Special Situations?

Special Situation Investing

Special Situation Investing is an important part of value investing and different value investors call them by different names. For example, Warren Buffett $BRK.B calls them workouts.

Special Situation Investing happens when a company is having a corporate action and you buy the stocks to take advantage of that. For example, if the company is merging with another one, is having a spinoff, a debt restructuring, or a liquidation.

One form of workout is arbitrage when a company is going through a merger and the stock price is currently trading at a discount of the acquisition price. An arbitrage opportunity I have in my portfolio is Kansas City Southern $KSU .

If a company goes bankrupt, it may go through a debt restructuring or a liquidation. Here also, if you know what you're doing, there's the opportunity to make money. For example, I invested in Whiting Petroleum $WLL went it filed for bankruptcy last year.

A company may also issue warrants, preferred shares, special dividends, or convertible bonds. Very often, you will see spreads in these. For instance, a convertible bond might be selling at a discount of the stock price. What you can do is buy the convertible bonds, then make the conversation when you are able to, making a profit out of this spread.

Why do special situation investing? Usually, it is to have a low market correlation and if you find a really good deal, you may see a big risk-reward opportunity.


⭕ Who is Ishfaaq Peerally:
Ishfaaq Peerally is a popular investor on the leading social trading network eToro where he manages investment assets for over 1400 people with $2 million in AUM. On this channel, Ishfaaq talks mainly about investing, stock analysis, passive income, financial education, economics and entrepreneurship.

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