When done correct value investors can win in a number of ways. So long as you have done your analysis correctly and the stock is truly undervalued there are a number of ways in which that value gap can close. The biggest risk in that situation is dead money. Last month we highlighted CVS in a screencast noting it was likely undervalued with a potential upside catalyst. A month later the stock is higher based largely on news that activists are agitating for a spin-off of the company’s pharmacy benefits manager. In short, he stock is higher for reasons unrelated to the original hypothesis. In today’s screencast a review of stock catalysts.
Items mentioned in the above screencast:
Breakup values point to a higher price for CVS shares. (Bloomberg)
A catalyst for CVS. (AR Screencast)
Update: CVS also catches an analyst upgrade. (Barron’s)