Big changes sometimes can turn a mediocre company into a good one; thats the second theme of chapter five in Joel Greenblatt (Trades, Portfolio)s You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits.
Put emphasis on the word big above. Thats the key to finding profitable corporate restructurings: This means the sale or shuttering of an entire division. Not just any division, either. Were talking a big division, at least big in relation to the size of the entire company.
This matters because the sale of big portions of a company can bring out hidden value. The example Greenblatt used was of a conglomerate earning $2 per share and trading at 13 times earnings ($26). The company has three divisions; tw…
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