Back from Dead: Finding Value in Challenged Businesses
The following is an excerpt from our recent research piece "Back from the Dead: Finding Value in Challenged Businesses" The full report can be found here: http://pathlightinvestors.com/sites/default/files/pdfs/October%20Pathlighter%20%2010162013.pdf
Halloween is a time of ghosts, goblins, monsters, and zombies—a month for candy, costumes, and haunted houses. I will be spending my Halloween with my two young children trick or treating, of which treats are their only interest, of course. In thinking about it, investment markets are not too dissimilar from the month of October. There are tricks, some treats, the walking dead, and some that will actually come back from the dead. The trick with investing is the ability to decipher those that will come back to life from those that may be perpetual zombies. In investment parlance, it’s the difference between finding value and value traps.
This analysis is easier said than done, as the abundance of information, or misinformation, media hyperbole, and the proverbial hot tip often lead investors to visit the wrong neighborhood. I’d like to take the mask off Pathlight’s investment process and let our clients and readers better understand the procedures we adhere to when researching and analyzing investment opportunities. We’ll use a real-life example of investing in a company that was left for dead by some investors but embraced by the Pathlight Investment Team.