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Jason Knapp

This Spun-Off Well-Managed REIT is Ripe for the Picking After a Sector Selloff...Special Situation Investing News - 8/17/2015

It's the start of a new week and we're going to start things off with a bang here at the Special Situation Investing News.  I'm going to kick things off by talking about one of the more attractive special situations that I am aware of right now, a company called NexPoint Residential Trust $NXRT.

I first became aware of NexPoint Residential Trust after reading a great post by Chris DeMuth Jr., manager of the hedge fund Rangeley Capital on his investing service Sifting the World.  At the time Chris wrote about it I loved the idea, but since the service is subscription-based and limited to a specific number of subscribers I purposely did not talk about it here.  However, the seal has been broken so to speak after Dane Bowler published a great article on the company this weekend over at Seeking Alpha:

NexPoint Residential Trust Offers 45%-60% Upside Catalyzed By Highly Aligned Management

NexPoint Residential Trust is a new REIT that was spun off from NexPoint Credit Strategies Fund $NHF at the end of March 2015. As you can see from the following chart, after some early strength, through no fault of its own this new REIT got caught up in the recent REIT sector selloff:

That means that today investors can purchase into this attractive situation at prices that are lower than investors who were aware of the story from the very beginning.

So what makes $NXRT so attractive?  Here's the Cliff's Notes version (anyone who wants the full version should check out Dane's great article).  In short, the smart folks at Highland Capital accumulated a number of attractive lower-end apartment assets while running $NHF that they decided to spinoff into a separate REIT.  Nexpoint's management has an impressive track record of acquiring inexpensive apartment complexes that they can invest money into to raise rents at incredible rates of return.  The REIT is cheap right now because it's new, lacks institutional coverage and it exists in a sector that has been brutally punished over the past several months, irrationally in my opinion.  This selloff has caused $NXRT's yield to balloon to an attractive, sustainable 6.8%.

$NXRT is externally managed which is never ideal for a REIT, but to me its managers' significant insider ownership more than offsets this risk.  Another risk is that several of the REITs apartment complexes are located in Texas where the jobs market has slowed as the price of oil has fallen.  Still the positives here far outweigh the negatives.  I have been long $NXRT since it was spun off and have added to the position on the stock's recent weakness.

And now for the rest of the news.  This is a great issue for whale watching, tons of big name investors new positions have been reported.


Fiat Chrysler has fuel left in tank for after Ferrari spin-off

Community Health Systems - Spinoff Plans And Financial Strength Create An Opportunity For Investors

Pending $FNFV spinoff J. Alexander’s restaurant to morph into ‘Redlands Grill’

SPX Corp provides update on spin off of SPX Flow; expects to be completed near the end of Q3

Darden Names Board Member to Head Planned REIT spinoff

Emergent BioSolutions Spinning Off Biosciences



Apparently there was still some meat left on the bone. $EPAX +12.5% Ambassadors Group Announces Approval of Dissolution & Liquidation, Reports Q2 Results


Thrift Conversions

Small New Jersey Bank Has Big Upside


Whale Watching

Activist Starboard Halves Its Yahoo Stake; Adds Boulder Brands

The New 13F for my favorite small cap activist, Becker Drapkin is out. New positions in $PRGX, $TSYS, $HDSN

Greenlight Capital Q2 13F:

Einhorn takes positions in HTZ, OI, KORS, UIL

Buffett's Berkshire Hathaway hints at new purchase, ups Charter stake

Nelson Peltz Buys 7.1% stake in Sysco for $1.6 billion

Third Point Q2 13F:

Dan Loeb took 6.5 mln share stake in T-Mobile USA in second quarter

Loeb’s Third Point Sold Stake in Dollar General During Second Quarter

Jana Partners opened position in Precision Castparts in Q2. Wonder if there was any funny business going on there?

John Paulson Sold 1 Million Gold ETF Shares in 2Q

Paulson Takes Stake in Starwood Hotels & Resorts.

Icahn Enterprises Takes New Stakes in Tegna, Gannett Spinco and Cheniere Energy

Activist Marcato boosts stakes in Sotheby's, Avis, lowers Lear

Perry Capital Cuts Paper Companies After Tax Change Wager

Hedge Funds Shed Shares in Alibaba and Baidu in Second Quarter

Tracking Bill Ackman's Pershing Square Portfolio - Q2 2015 Update

17 Mile Annual Investment Letter August 2015


Activist Investors

TCS Capital May Urge A Sale At Angie's List

Accretive Capital Supports Sale Of MCG Capital $MCGC To $PFLT With Expectation That Cash Will Be Invested Patiently

Sandell's Plans For Ethan Allen Seem Unlikely To Succeed

Rolls-Royce’s Activist Overhaul Could Stall

Investment Write-ups

Why I'm Giving VEREIT (Formerly ARCP) A Second Chance

Saibus Research: ARLP: A Diamond in the Rough Among the Unloved Coal Industry

Here's a write up on one of Becker Drapkin's new positions Hudson Technology

Incremental Improvements At Gladstone Commercial

Macy's: Starting To Look Appealing With Starboard Coming Onboard

Owens-Illinois Glass Half Full. A stock this disliked should interest the contrarian investor.

Opinion: Disney is going to be a big winner as consumers cut the cord

Other Investing News

No, Google's restructuring isn't about cutting taxes

Exclusive: GE expected to win EU approval for $14 billion Alstom deal

Buffett’s Precision Castparts Deal Will Boost Berkshire Hathaway’s Value

CafePress posts second-quarter earnings, plans another divestiture

Meet the Man Who Won on Greek Stocks When All Others Failed

QVC to Acquire Online Shopping Site Zulily for $2.4 Billion

Strategic Hotels Exploring Possible Sale

It's nice to see Disney $DIS bring back shareholder certificates. I need to pick up 2 for my kids

While this is a ton of news, I'm sure that there are some interesting things that I have missed. If you've seen one, or have an opinion on something that I've written about (good or even bad) please take a second to give back by sharing it in the comments section. My goal in creating the Special Situation Investing Community was to create a free place on the web where like-minded individuals who love this style of investing like I do can come to discuss it and share ideas. So please, comment, comment, comment. The more dialog we have and ideas we have floating around the better it is for everyone.

Also, if you haven't already, make sure to click on the link at the top of the page to join this new special situation investing community. Doing so will enable you to receive notification when new articles are published here and to share your own ideas. Also, make sure to follow me on Twitter @TMFDeej.

Have a great day!

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