Sometimes the best new idea is an old idea.
We sold the shares of executive search firm Heidrick & Struggles (HSII) at $17.37 per share on July 5, 2013. Today we were able to buy back a position at $14.94, a 14% discount to where we sold just twenty-four days ago.
We picked up 250 shares for our Virtual Value Portfolio. The $3,735 cost came out of our cash reserves. Market Shadows will pocket a quick cash rebate on this purchase as HSII goes ex-dividend for a 13-cent distribution on Wednesday.
At least two private equity firms had been interested in taking HSII private at valuations ranging from $17 – $19 per share. Management says they are committed to staying independent. Experience says that might simply mean they want a higher offer.
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Either way it’s likely that HSII is worth well above the sub-$15 we had to pay this morning. The shares have traded way, way higher than that over most of the past decade.
The buyout firms were convinced they could profit from privatizing the company at much higher levels than todays. Patient investors can pocket almost 4% in yield while waiting for the mean-reversion price that should evolve over the next full business cycle.
Another buyout rumor or an actual takeover would speed up the process.
See full details of all open and closed-out positions here http://marketshadows.com/virtual-portfolios/virtual-portfolio/
Disclosure: Paul Price bought HSII shares in his personal portfolio today as well. My cost ranged from $14.92 – $14.94.
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