Jason Knapp
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Special Situation Investing News - 8/7/2015

I'd like to start today's Special Situation Investing News off with a follow-up to an earlier article that I wrote, Release the Kraken! Activist Investors May Finally Unlock the Hidden Value at LSB Industries.  I'm big into personal accountability.  If one is going to toot their own horn when they have an investing victory, they should face the music when an investment idea that you have presented has a temporary setback.  

Shares of LSB Industries $LXU are down more than 30% today after disappointing quarterly results.  This wasn't a huge position for me, I always had reservations about the quality of the company's management, but I own some and I've talked about it so it hurts. 

Why the dramatic selloff? It seems like anything in this market that has even a hint of bad news is getting annihilated. The cost overruns as a result of the expansion of LXU's chemical facility have been public knowledge for a while now and the stock didn't react much to them, so I suspect that Mr. Market's disappointment stems less from the results and the overruns than from this press release:

LSB to Implement Strategic, Operational and Corporate Governance Enhancements


Once again it appears as though LSB management has chosen to protect its fiefdom rather than to split off the chemical and potentially create an MLP. At least for now.

The company's recent results clearly were not good either. The bad:

  • Bookings for Climate control business declined 15% Y/Y but grew 6% Q/Q to $70.2M in Q2.
  • Chemical revenue decreased 23% to $112.77M.
  • New orders from the commercial end-markets -15% Y/Y.
  • Residential product new orders fell 20% Y/Y.
  • Gross margin rate dropped 513 bps to 19.1%.

Yuck.  All in all it was a bad quarter without any of the financial catalysts that many were looking for. I plan on holding onto my position, but I have not added yet. The activist investor who is involved, Starboard Value, and perhaps even Horizon Kinetics will hopefully knock some heads at LSB and get things straightened out.

I haven't had a chance to listen to the call yet, but I plan to. Here's a link:

LSB Industries (LXU) Q2 2015 Results - Earnings Call Webcast


That's not a pleasant way to start off today's news, but it was necessary.  At least it's Friday and almost Happy Hour.  

On a more positive note, if you like Special Situation Investing, this is the place to be.  I have yet to come across a more comprehensive resource for news on the subject.  Here's the rest of the news, featuring two new huge activist positions from King Ichan and ValueAct.


The recent broadcasting spinoff from the Scripps / Journal

Communications merger Scripps up 3.7% as TV results boosted by retransmission revenues


$CHS Spinoff to Focus on Rural Healthcare


Beleaguered L3 spinoff Engility Holdings +30% on earnings beat


$NCT spinoff New Senior Announces Second Quarter 2015 Results


W. R. Grace has named its construction products spinoff



Activist Investors

ValueAct Said to Amass AmEx Stake as Activist Seeks Targets


Icahn takes stake in Cheniere Energy, seeks board seat


Ackman Plunges Into Mondelez, Wants To Undo Kraft Spin


Dan Loeb Sees Opportunity in Latest Target Baxter International



Whale Watching

The same stock that scorched David Einhorn is burning Leon Cooperman


Lone Pine Calls it Quits on Apple, Facebook And Baidu


It’s Shaping Up To Be A Tough Year For Carl Icahn



Merger Arb

Williams Partners Sell Off Completely Unjustified




Lindblad Expeditions reports Q2 results 




JDPI 2Q15 Letter To Investors – Value In NOLs.  This is a great letter with a ton of information on investing in NOLs, including one that I personally own, the bloated carcass of Washington Mutual, $WMIH.



Investment Write-ups

A new era begins for VEREIT


Update on Essex Rental


Hot or Not? The Prospects of 8 High-Profile Stocks. Interesting commentary on $WYN. 


Despite $SIGA's Claim, The Supreme Court Will Speak Soon And PharmAthene Will Fare Well


Code Rebel: 90%+ Downside - High Risk/No Reward



Misc. Investing News

S&P Dow Jones Indices Launches Spin-Off, IPO and Activist Interest Indices


Horsehead Holding +12% on stronger than expected Second Quarter 2015 Results


Apollo Shoots for Moon With Risky Bet in Schorsch real-estate empire.


Noranda: Plant production mostly on track after explosion. Molten aluminum is being redirected to other prod.


Lumber Liquidators Has Lost $100+ Million Buying Back Stock


Volt Information Sciences, Inc. Completes Sale of Uruguayan Publishing and Printing Businesses


Thanks for reading. 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, 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.

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Have a great weekend!