As investors, we deceive ourselves a thousand different ways, both small and large. We attribute gains to acumen when they are the product of luck, and we attribute losses to ill fortune when they are often the product of stupidity or inattention. We believe that the market remembers or cares about the price we paid for a stock, or that out stocks will go up when every other stock is going down. But most commonly in markets, we fall in love with a company that is unworthy of our affection. –Leon Levy
Note: Worrying about macro issues or politics should not distract you as an investor. Our job is to protect and grow our capital.
Book on Corporate restructuring
Creating Value Through Corporate Restructuring – Stuart C. Gilson & Edward I. Altman A good book on special situations through the eyes of a CFO.
Special Situation are typically viewed (by me) as asset conversion activities. Management is incentivized to unlock undermanaged or mispriced asset values. The corporate event is what drives returns not necessarily the market in general. When quality companies are not on sale, I look here for opportunities.
To be proficient in special situation investing you have to look closely at management’s motivations and for uneconomic sellers. Practice and you will grind out decent returns (15% to 25%).
Learning hint: Take a particular technique of corporate restructuring like liquidation or tender offers and try to read as many case studies and articles about that subject as you can. Next develop search words that will help you find opportunities. A good place to view case studies is by looking through old blog posts at www.greenbackd.com.