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Jason Knapp

Change is Good. It Often Creates Temporary Gaps Between Price & Value That Can Be Profited From

Two days ago, a former value investing blogger darling Ambassadors Group $EPAX issued a press release stating that it was shutting its doors for good and liquidating. 

Ambassadors Group to Close Student Travel Business

Naturally the "bad" news instantly caused $EPAX stock to sell off. That's when I started to get interested. Change is good. It often creates temporary gaps between price and value in stocks that can be profited from.  At the time I said the following on Twitter:

"@TMFDeej I wonder what the liquidation value is for $EPAX?

@TMFDeej Not surprisingly's $YHOO's #s fr it are all screwed lists $78.56M cash or $4.54 for $EPAX with $0 debt.

@TMFDeej I'm not a believer in EMT, but if $EPAX really had $4/share in cash, no way it would be trading for $1.78. More research is needed."

Of course, life got in the way and I never had a chance to dig into the numbers any deeper. Apparently my thesis or SSSS "Special Situation Spidey Sense" that the liquidation value might be higher than where the stock was trading was right. Here's this morning's press release from the company:

Ambassadors Group Provides Deployable Cash Information

"As of June 30, 2015, deployable cash was approximately $45.3 million, up from $31.7 million at March 31, 2015...The Company's board of directors is evaluating efficient ways to distribute all excess cash to its shareholders. The amount of any such distribution and its timing cannot be estimated at this time."

The stock is now trading 30% higher than yesterday's close. @#$%^&!  I knew it.  That and five bucks will get me a cup of Starbucks though because I never acted on it.  Oh well, I'll keep my ear to the ground and we'll get 'em next time.  Check out this wild chart:

A five-day chart of $EPAX (click to enlarge)

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