Return to search

Better Than The S&P 500

I have issued exactly one piece of investment advice since the credit crunch began six weeks ago: Buy stock in publicly-traded companies that have already agreed to go private. One or two might sour, but the overall “index” will generate positive returns. If you did so, I accept thanks in the form of story leads and/or Red Sox tickets…

There are 25 ending take-private buyouts, and Thomson Financial has analyzed their stock performance from August 1 through market close last Friday. Seventeen of the 25 have experienced gains over that time period, including 4.7% for Sequa Corp. and 4.44% for Hilton Hotels. The average gain got dragged down considerably by the -8.42% performance of Affiliated Computer Services, but still ended up at 1.09 percent. So maybe bleacher seats instead of boxes…

For comparison, the S&P 500 lost 2.83% over the same time period, while the DJIA was up less than two-tenths of one percent.

And there is still some wiggle room, as the average take-private was still trading around 4.44% below its buyout price. There could be a few re-pricings in the mold of HD Supply, but that situation was pretty unusual (good explanation here).

So keep buying the whole basket. It’s as sure a thing as can be found in an uncertain market.

Download the Thomson data here