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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (42098)	3/31/2011 3:58:57 PM
From: rllee	Respond to of 78657

KHDHF has been identified in a recent article as an undervalued stock trading at less than book value. I wonder if it,too, might also be worth holding on. KHD Humboldt Wedag (KHDHF.PK) KHD originally came to my attention as a pure value play in Joel Greenblatt's magic formula screen. What really caught my attention was that it had $13 in cash but was only trading in the market for $11.85. This cash amount was had a disputed value given that it was cash collected on revenues for services that were being performed or had not been completed yet but in my eyes cash was cash. The company may not get to keep all of it in the event of contract cancellations but they were definitely in a far more favorable position than most others. On top of this, the company had high exposure to emerging markets which I felt would resume their growth once the recession was over. It turned out KHD turned itself into a special situation. The management stated they did not feel their value was adequately reflected in the market price and that they were going to split the company into two companies to unlock that value. The company was then split into Terra Nova Royalty Company (TTT) and KHD Humboldt Wedag via a stock dividend over the course of the next few months. Investors had a plethora of opportunities to buy below the $11.85 states above AND had an opportunity to take part in a rights offering to get even more shares at a further discounted price! Ultimately, the share shares purchased in November 2009 for $11.85 are worth about $17.67 (considering the share prices of both companies) AND it looks as if there may still be more to run as KHD has plenty of room to run in its valuation. Investors who took part in the rights offering or added to their shares as the market price dropped were rewarded even more handsomly. Any readers on SeekingAlpha could have followed this entire process through the well written articles by George Fisher who attempted to determine what KHD was actually worth after the split as the process was happening. seekingalpha.com