2020 was a very eventful year for the whole world and for the financial markets. However, as with every crisis, it provided numerous attractive investment opportunities to capitalize on.
SSI used these opportunities well and did great during 2020:
- Our tracking portfolio returned +60% during the year and +323% since 2017. See full details here.
- In total we published 138 investment ideas (49 main and 89 quick) on SSI during 2020.
- We achieved 81% Win Rate on situations we covered.
- We also carried out 3 in-depth investment strategy studies on Merger Arbitrage, Split-offs, and US-Listed Chinese Firm Privatizations.
So all in all, 2020 turned out to be a really exciting year for SSI performance-wise.
The chart below illustrates a detailed breakdown of returns on individual special situation ideas published during 2020:
While a large part of published special situation opportunities generated returns in the range of 10%-25%, keep in mind that the average holding period was just around 2 months, which translates into very impressive IRR performance for most of our cases.
A NUMBER OF HIGHLIGHTS
- A few of the ideas published in 2020 still remain among our active cases. It also includes Nr. 1 and Nr. 3 best performing ideas (see the graph above) – GROW and VHI, which still have plenty of room for further upside (a major catalyst for GROW is upcoming in one week).
- TNK.AX (+113% in 4 months) and CWD.L (53% in 1 month) were prime examples of a well-timed merger arbitrage/bidding war situation, where fundamentals showed strong support for further bid increases.
- SKYS (+100% in 1 month) was an interesting privatization idea shared by one of our members. The idea detailed that what initially seemed like a repulsive situation (US-listed Chinese firm with fraudulent ex-CEO + pile of litigations), was, in fact, a great set-up with very credible buyers chasing after the company.
- We’ve also had several interesting capital structure arbitrage/capital restructuring situations, all of which turned out quite lucratively. A few examples:
- METX (175% in 1 month) – a warrant arbitrage where a failed post-merger SPAC temporarily reduced the exercise price of its warrants in order to generate the necessary liquidity.
- AHT-PG (80% in 1 month) – the company was carrying out capital restructuring aiming to exchange all of its preferred shares into common shares.
- NKLA (36% in 1 month) – an interesting capital structure arbitrage between the SPAC warrants and post-SPAC common shares.
- BIOX (32% in 1 month)- warrant arbitrage with all of the outstanding warrants being exchanged into either cash or stock consideration.
- Two split-off transactions were featured last year resulting in substantial and nearly risk-free returns: $1200 for MCK/CHNG ($1200 in 1 month) and $2100 for ECL/APY. Unhedged positions in ECL/APY cashed $10,000 profit in one month.
- The idea that performed the worst in 2020 was NTP – an activist control case, where an activist (supported by 40% of shareholders) was trying to oust the board of a mismanaged real estate developer in China. The board found a way to block the activist and we have closed the idea at a loss. However, this year the situation has made an unexpected turn – the court fully supported the activist and voided the previous dilutive transaction, which previously blocked the activist. Thus, the idea was returned among active cases with 45%+ of potential upside still remaining.