Trina Solar (TSL) Deal Closing – Up 18% in 3 Months

Bank of New York Mellon which handles the ADR shares of Trina Solar appears to be finalizing the all-cash TSL self-buyout of the U.S. based shares. I am up 18% in the 3 months I have owned it compared to a 5% gain for the S&P 500.

This investment worked in part because the valuation was so cheap that I was never sweating getting stuck with the TSL shares if the deal fell-through. The price was well-supported by a valuation floor, which poses a sharp contrast to my Rite Aide debacle. Trina Solar ADR shares were trading at single digit valuation multiples as recently as a month ago. I felt confident that Chinese regulators were not going to block the Chinese founder of his company from buying back his own US-based ADR shares. So when the stock was selling off due to vague macro fears of a Chinese capital outflow clampdown,  I bought. Disgusted and exhausted U.S.-based investors had discounted the likelihood of the deal closing.

It is interesting to see Berkshire Hathaway now doing the same style investment in Monsanto, a stock founded on low valuation but which includes 12.1% of upside M&A optionality if the deal closes. To me this lends credence to my initial thoughts about M&A investment back in the fall. Many of the regular risk-arb M&A firms chose to sit on the sidelines rather than take on some of the riskier M&A deals available without considering the cheap-to-fair valuations of the pursued companies.

My portfolio is getting more manageable at 25 stocks. For anyone interested in M&A arbitrage spread ideas, two great resources here:

http://www.insidearbitrage.com/merger-arbitrage/

http://www.mergerinvesting.com/pendingmergers

 

 

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Author: secondhandstocks

The genesis for this blog stems from a Marine buddy and I came back from Afghanistan with more money than knowledge, and heedlessly tossed our hats into the stock market ring. A few months later, I remember discovering the classic book The Intelligent Investor by Graham and Dodd, and ravenously devouring my first introduction to value investing. That framework - with some generous additions by Seth Klarman, and Joel Greenblatt among others - guides my investment philosophy. I spent five years working in the intelligence field, both in the Marine Corps and then for a government agency after that. I speak Arabic and Pashto, have programming and analysis experience, and enjoy investing in technology companies as a hobby. I also spent a year on Wall Street working on a #1 Ranked Institutional Investor team, before deciding that that the Sell-Side was not for me.

2 thoughts on “Trina Solar (TSL) Deal Closing – Up 18% in 3 Months”

  1. Take a look at SYK – their track record of M&A (inorganic growth) has been incredible over the last 6-10 years. Their stock has grown based on the positive bounce post merger.

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