Your "Special-Situation" Stock Wins of 60% and 114%
An Investing Blueprint for Winners — Without the Risk of "Trading"
As a guy who’s been covering public companies, writing about the economy and the stock market and picking stocks for the better part of 40 years, I’m not afraid to say that it scares me when I compare the “streetscape” for individual/retail investors today … versus the one they faced four decades ago.
In fact, it downright terrifies me.
I’m not talking about people like us — the Wealth Builders who’ve joined our community here at Stock Picker’s Corner (SPC).
We’ll all be fine.
For the most part (and I’ll talk about the exception here in a minute), we play the “long game” — investing in stocks and other undervalued assets … and understanding that we’ll be holding them for three, five, seven or 10 years … or longer.
We’ll overcome adversity. We’ll elbow aside uncertainty. We’ll sidestep the trashy, flashy, scam-laden “strategies” and “products” du jour.
We’ll follow the strongest storylines. And we’ll find the best stocks. We’ll see the opportunities that others are blind to. Our “radars” will identify the big threats that most others see as juicy “easy-money” plays.
We’ll invest instead of trade … and we’ll flourish.
But all the “other” investors … the “uninformed” who succumb to some or all of the the “money traps” I’ve hinted at here … they’re on a Wealth Killer path … and I fear for them.
And here at SPC, we’ll continue to do our best to “convert them” …. from Wealth Killers to Wealth Builders.
Because the Wealth Builder strategy is a simple one.
Simple … but powerful.
First and foremost, we find those powerful storylines …. which lead us to the best companies — and the best stocks. And we take the long view.
Except ….
With “special-situation” plays — which can pack a real punch in a much-shorter time frame.
And today I’ll show you two that we’ve won with in SPC’s short tenure here on Substack.
One from our our SPC Premium publication.
And a second from our free daily research.
One delivered a 60% gain in 10 weeks (the equivalent of a 312% gain over a full year). And the second has more than doubled since July — with a peak gain of 137% — and is still running.
Both have lessons to share.
SPECIAL STOCKS FOR SPECIAL INVESTORS
Let’s start by talking about the company from SPC Premium — because it’s part of an important project we did for our paid subscribers.
While most of our work focuses on powerful, longer-term storylines that the Big Money Pros like to refer to as “narratives” or “money flows,” there are opportunities created by what I like to refer to as unique “triggers.”
We’re talking here about companies doing stock buybacks, facing pressure from activist investors, considering partial spinoffs or full-on breakups, undergoing takeover talks or doing merger deals themselves. (Spinoffs are a personal favorite … I’ve identified some really terrific ones for my newsletter subscribers over the past decade and more.)
These shorter-term special situations can provide some near-term “juice” to your overall portfolio returns.
Back in the late summer — and into early September — the SPC team evaluated dozens of special-situation candidates. And we ended up creating a “Super 10” portfolio of special-situation investments — as a bonus opportunity exclusively for members of SPC Premium.
And we have an early example of the portfolio working as intended, as we just “sold out” of a position for a near-60% return in a little over two months. That’s 6% a week — or an annualized equivalent of 312%. And that annualized equivalent would also translate to 28 years’ worth of the stock market’s long-term annual average of 11%.
When the market hands you a 60% windfall in 10 weeks — given the uncertainty we could face in the New Year — we thought it prudent to “sell” the stock (and book the gains).
But the fact remains that the longer-term reasons we liked the company in the first place still hold true … meaning the stock bears watching since that end-game upside remains. And since it’s no longer in our Special-Situation Portfolio, we thought we’d give our free readers a taste of what we’ve done with that “Super 10” project.
I mean, this is a great example of:
Smart portfolio management — booking gains when a company experiences a short-term “hot run” like that.
Giving you folks a “peek behind the curtain” of the work we do — and the research we offer.
And sharing an intriguing stock with all of our readers.
The company is Dutch Bros Inc. BROS 0.00%↑, and here’s what the original research from September looks like …
SPECIAL SITUATION NO. 1: DUTCH TREAT
It’s Main Product: Dutch Bros sells coffee, tea, smoothies and snacks. It’s known for fast service, a rewards program and an “eventized” ordering experience — with limited edition (and highly sought after) stickers that nurture the company’s “community.” It has 912 locations (612 company-owned).
Why We’re Watching It: As people push back (and cut back) against higher prices for fast food, coffee remains a ritual — an affordable luxury folks buy daily. Dutch Bros also has a competitive advantage over Starbucks Corp. SBUX -1.57%↓; it offers variety (energy drinks, smoothies, sparkling soda, shakes, and a small collection of snacks) — but a streamlined menu avoids the endless concoctions that slow service and keep lines long. And it’s a growth story: With those 912 locations now, Dutch Bros is just 22% of the way to its corporate goal of 4,000 shops in the next 10 to 15 years.
Special-Situation Kicker: Dutch Bros could be an attractive target for companies like PepsiCo Inc. PEP -0.52%↓or Coca-Cola Co. KO -0.59%↓ — suitors so big that they need to “bolt on” growth, instead of building from within. We could be talking straight buyout — or a partnership that gets more Dutch Bro products in more stores — just as Pepsi has done for Celsius Holdings Inc. CELH 4.63%↑. Big Food firms — which have also been wheeling-and-dealing the last few years — could also be players.
Risks: Dutch Bro shares dropped 19% in August because the company said new-store openings will come in on the low side of its 150-store guidance. That’s a classic overreaction. However, the company operates on razor-thin margins. And its chief product — coffee — is a commodity whose price can be whipsawed.
Since we billed these special-situation stocks as intermediate-term opportunities — and since we see the potential for a lot of uncertainty-ignited volatility in the months to come, we took what the market has handed us … and “booked” the gain of roughly 60%.
But that doesn’t end the long-term opportunity with Dutch Bros … or take it off our radar.
Earnings are expected to grow 21% next year, and stock prices tend to follow earnings growth higher. It also has that special-situation kicker still in tact as an acquisition target, where “Big Beverage” or “Big Food” firms —with their cash, business know-how and market power — could bolt on Dutch Bros (with its drive-thru shops in 18 states) and transform it into a national brand with its coffee packages on grocery store shelves and its cold brews in convenience stores.
And for SPC Premium members, we just added a new position to replace Dutch Bros.
SPECIAL SITUATION NO. 2: BIRTH OF A UTILITY
Back in July — seeing that stocks may be ready to wobble — I came up with a list of “Pullback Plays” … five stocks worth grabbing if their share prices hit the skids.
One of those stocks was especially interesting — the “utility-in-the-making” company called Hallador Energy Co. HNRG 0.00%↑. The stock was at $8.41. And I said if it got to $6 or less, it was worth grabbing. On Aug. 21, Hallador closed at $5.90 — and in a report the next day, I told you folks that the buying window I had ID’d had arrived.
Here the special-situation aspect is threefold … since you have a company that:
Is undergoing a change in business strategy — meaning it is probably “misunderstood” by most investors.
Is positioned to capitalize on the long-term “supply shortfall” in commodities like coal.
And would shift to “Buy” status via a share-price pullback — either in the stock itself or due to a broad market pullback.
The strategy shift — from straight coal miner to power-providing utility — offered another interesting facet: America faces a long-term power shortfall (which is detailed in my original report).
And here in the Artificial Intelligence (AI) Era, the explosive demand for data centers will amp up the need for power (I know … I know … a bad “power pun”). And the appetite for power, land, water and workers could lead to new data center projects being sprinkled about the country — perhaps close to existing power plants, or even prompting custom “mini-plants” to be built.
For folks who acted on my Hallador research, this has worked out great.
Since that close at $5.90 on Aug. 21, Hallador shares have soared as high as $14 — a price hit on Nov. 21. That’s peak gain of 137% gain in three months — or roughly the annualized equivalent of 549%.
The stock has trended back just a bit — and closed Wednesday at $12.60. That’s a gain-to-date of 114%.
There you have it.
Two special-situation winners. Two stocks that packed a hammer punch in a very short time frame.
But we’re not talking about “trading.” We’re not talking about “options.”
These are Wealth Builder plays … not Wealth Killer traps.
As we said to our SPC Premium members when we delivered our “Super 10 List of Special Situation Stocks” a few months back, special-situation stocks occupy that “intermediate” ground between speculative trading (which we avoid with every fiber of our very being) and long-term investments (which we aim to hold for three, five, seven years … or longer). Really great special situations are tougher to find, and carry more risk, but the payoff can happen quicker than with long-term wealth plays.
Dutch Bros and Hallador are real-life “proof points” of that.
(But, just being honest, even I wasn’t expecting Hallador to pay off this fast.)
I fear for the Wealth Killing masses.
But I’m optimistic for the SPC family that visits to break bread with us every day.
See you next time;
