Peer into the weekly trading notes of a hedge fund manager. Cut through the clutter and stay up-to-date on these unique, Event-Driven opportunities with Kuppy’s Event-Driven Monitor.
Kuppy’s Event Driven Monitor (A.K.A. KEDM) keeps you up to date on corporate events and special situations to drive your investment strategy.
The issue is that there are over 7,000 stocks in the U.S. At any time, 100s of them are undergoing a corporate event. Keeping track of these catalysts to generate returns requires a team.
KEDM solves this problem for you by monitoring over 20+ screens for these “events.” Every week, Kuppy, a successful hedge fund manager, and his team of KEDM analysts review ALL of these events and distill them into their “Kliff Notes” for the coming week.
Every Saturday you will receive commentary on the events that matter most. With KEDM you will never miss another catalyst!
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Event-Driven investing is a hedge fund investment strategy that seeks to exploit pricing inefficiencies that may occur before or after a corporate event, such as a spin-off, bankruptcy, merger, acquisition, or CEO change.
Bottom-line, Event-Driven investing looks for catalysts. Instead of waiting around for stocks to go up, we look for timely events that help create their own returns.
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[BTU is a] Large PRB thermal coal producer with Alabama Coking coal and Australian seaborne thermal coal operations…
On January 23, 2021, KEDM flagged a HUGE amount of insider buying in a clothing retailer called Destination XL Group which sells…
A popular Event in recent years is a merger of a Special Purpose Acquisition Company, also known as a SPAC. These are shell…
Companies emerging from a successful Ch.11 restructuring can be a fertile hunting ground for equity trades…Why is that?? Generally the previous…
Kuppy’s Event Driven Monitor (“KEDM”) is not a financial or investment advisor and the information contained in this publication is not intended to constitute legal, accounting, or text advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in this publication may not be suitable for you. You are required to conduct your own due diligence, analyses, draw your own conclusions, and make your own investment decisions. Any areas concerning legal, accounting, or tax advice or individually-tailored investment advice should be referred to your lawyers, accountants, tax advisors, investment advisers, or other professionals registered or otherwise authorized to provide such advice. KEDM makes no recommendations whatsoever regarding buying, selling, or holding a specified security, a class of securities, or the securities of a class of issuers, and all commentary is for educational purposes only. The investment examples noted are intended to provide and example of the events and data KEDM flags each week and is not representative of typical returns generated by each event or any future returns.
Let’s take a look at another “ESG” play and see how a change in leadership was the needed catalyst to unlock shareholder value. This time in the hated coal sector. Peabody Energy was a beaten-up thermal coal stock that was drowning in debt. We first flagged it on our proprietary Fallen Angel list back on October 24, 2001:
“[BTU is a] Large PRB thermal coal producer with Alabama Coking coal and Australian seaborne thermal coal operations. Play on US natural gas and Newcastle seaborne recovering with reflation and global GDP growth. Trades at less than 1/3 of FCF during 2017 and 2018 when coal prices were higher. FCF negative today as key Australian coking coal operation had a fire and US thermal pricing collapsed. Elliot owns 30% and controls it through board seats.”
But the stock was still waiting for an Event-Driven catalyst. This came in the way of the activist fund Elliott pushing out the CEO. On 3/28/2021 KEDM flagged the event:
“BTU has finally seen Elliot kick Glenn Kellow out. I am surprised it took this long. I suspect that new management will dramatically re-focus this company. There are too many assets and too many problems. The debt is now termed out and coal prices are on the way up. I think fresh eyes could do wonders here.”
On 5/8/2021 KEDM flagged the new CEO taking the reins “Update 5/8/2021: BTU getting a new CEO and despite rather gruesome Q1 results, the chart is breaking to the upside from a big base. Commodities are hot.”
KEDM also tracks insider Cluster Buying from top executives in a company. Each week KEDM scrubs the public filings to find companies where more than one Board Member or executive from the C-suite (CEO, COO, CFO, etc) use their own money to buy stock in the company in the open markets. These aren’t “free” shares given to them through options or a compensation package. These are insiders taking money out of their own bank accounts to purchase shares. Insiders will sell for all sorts of reasons, but when they put their own money on the line, it can be a powerful indicator.
Lets take a look:
On January 23, 2021, KEDM flagged a HUGE amount of insider buying in a clothing retailer called Destination XL Group which sells “plus-sized” clothing across the country. The CFO, CEO, CMO, General Counsel, and Vice Presidents all went into the market and bought hand over fist at around .30 cents per share.
KEDM flagged the event and wrote:
“DXLG cluster buy is fascinating. I’ve always thought this business had a lot of potential (Americans are quite fat), but was mismanaged. I think the new CEO is doing the best he can in a bad situation due to COVID. In particular, their digital strategy is ramping fast (vs. no prior strategy at all). If it can get to FCF positive in 2021 as guided, this is going to be a multi-bagger.”
A popular Event in recent years is a merger of a Special Purpose Acquisition Company, also known as a SPAC. These are shell corporations that list on an exchange with a pile of cash looking for a company to merge with and bring to the public markets. While the space has been littered with iffy companies, while one SPAC caught KEDM’s.
On 12/19/2020 we wrote:
[We] are probably going to regret pointing this out, but MCAC is buying Playboy. Playboy is no longer magazines and porn. Instead, it’s a licensing business where future contracted license revenue is more than the EV….
License revenue is growing and the company is adding a DTC business selling products with the bunny logo (clothing/booze/gambling/etc.). While [we] don’t understand who wears this stuff, [we] know that it’s popular as the revenue keeps growing….
If they hit their guidance for 2021, it’s 10x EV/EBITDA which is awful cheap for a growing licensing business. It’s a SPAC, so it probably doesn’t hit guidance, but [we] figured we’d throw it out there to look at during this slow week as it only trades a few cents over the cash in the trust account and the float is thin. CEO has made a number of recent presentations that were worth listening to. [KEDM] spoke with him recently and came away impressed.”
On 2/6/2021, we followed that up by saying:
“MCAC will close its SPAC transaction this week. I’ve written about this one previously as they are buying Playboy and I believe it is unusually cheap for a SPAC. Should begin trading with the PLBY ticker, which should get it a lot more attention and it has a tight float.”
Out of the 40 or so completed SPACs since December, KEDM flagged one of the VERY rare winners in recent SPAC-land.
Read Kuppy’s Notes and track SPACs (plus over 25+ other Event Driven monitors) at KEDM.com
Companies emerging from a successful Ch.11 resturcturing can be a fertile hunting ground for equity trades…Why is that??
Generally the previous debt holders are swapped for equity in the new company…this gives equity to holders who may be mandated to only hold debt so they “flip” the equity once it relists…
The relisting is typically without fanfare or media coverage leaving it an underfollowed stocks…
Let’s take a look at a great example of this in action…
Weatherford International, $WFTLF, provides oil field services and equipment. Like many other oil services companies, they restructured and exited bankruptcy in December 2019 which pinged on KEDM’s Post-Bankrupcy monitor…
The stock immediately sold off due to forced selling and the Covid crisis where it churned for months slowly finding a base…
Interestingly, the company pinged again on KEDM’s 13D Monitor in the summer of 2020 when DE Shaw filed to shakeup the board AND AGAIN on another KEDM Monitor when they installed a new CEO in October 2020
The ticker eventually made its way to KEDM’s Fallen Angel list where we said:
“You have about $500-$600m of run-rate EBITDA even before future cost savings plans are initiated. This seems cheap on a MC and EV basis. Debt is termed out and it should be FCF positive going forward (was positive in Q3 though a bunch of that was WC related). This is despite a new CEO having his ‘bath quarter’ in Q3…”
So how did this all play out in the stock price?? Up 600%+ if you were able to find the bottom…
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