Finding stocks with asymmetrical risk-reward characteristics is at the core of successful deep value investing. And it’s a key ingredient in the success of our Billionaire’s Portfolio service.
Another important ingredient in our process is identifying stocks with these characteristics that also have the presence of an influential investor. When we have a deeply distressed stock, and a bulldog investor that owns a huge stake in the stock, our chances of a positive outcome increases dramatically.
With that said, in addition to searching through SEC filings for investors that are building controlling
interests in companies, we like to run a series screens to search for stocks that have a 100% to 200% potential upside, combined with limited downside risk. Many times, when we find stocks that fit the bill, we will find a big investor already involved.
In running our screens for the first week of November, the following five stocks have hit our radar as high potential, deep value candidates. Plus they all have the presence of a huge private equity firm:
1) Dice Holdings, Inc. (NYSE:DHX) has a current share price $7.49. The $15 billion dollar private equity firm General Atlantic, LLC owns more than 15% of this stock.
2) Noranda Aluminum Holding Corp (NYSE:NOR) has a current share price $3.04. Apollo Global Management, the $22 billion dollar private equity firm, owns more than 48% of NOR.
3) Red Lion Hotels Corporation (NYSE:RLH) has a current share price of $6.00. The private equity firm Columbia Pacific Advisors owns more than 28% of this stock.
4) Sun Bancorp Inc. (NASDAQ:SNBC) has a current share price $3.20. The private equity firm Invesco Private Capital owns more than 24%.
5) Exco Resources Inc. (NYSE:XCO) has a current share price $5.41. The $15 billion dollar private equity firm Oaktree Capital Management owns more than 16% of this stock.
This gives us a great starting point to identify a stock that may be deeply undervalued with the added kicker of an influential shareholder on board.
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President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor