In our Thursday letter, I showed you one stock being snapped up by big money players on Wall Street that could lead to enormous profits for those of you who are quick enough to jump on the coattails of activist investors.
Today I want to give you a couple of other picks to take you into the weekend with the same stunning profit potential as Capital Senior Living (CSU) could give aggressive, patient investors.
First up on our profit stage this week is Papa Johns (PZZA).
It’s been a turbulent time for the pizza delivery company that boasts of better ingredients.
There has been a fight for control of the company since founder John Schnatter used some less than politically correct language on a training call.
The board took steps to remove him, and Mr. Schnatter attempted to wrestle back control of the company he started.
Unfortunately for Mr. Schnatter, the board rebuffed him and went looking for an outside investor to help fund and lead the turnaround.
It didn’t take Papa John’s long to find a firm fresh off of a triple-digit restaurant win.
Big money is on the move, and it can make you enormous amounts of cash.
What we call activists today were called corporate raiders when I first started.
They would snap up a large chunk of a stock on a company they thought was undervalued and demand management to sell it – either to them or some other willing junk bond-fueled LBO artists.
A lot of folks got what I like to call dirty, stinking, filthy rich as raiders, and those of us who figured out to reverse engineer their targets also did pretty well for ourselves.
Corporate raiding still exists. It just has better PR agents these days.
Today the practice is known as corporate activism.
It still puts huge profits in the pockets of those who hide behind a mask of “shareholder value” and “corporate governance” to force significant changes – or even the outright sale of a company.
Activists may not flaunt the image of the pirate any more (as Tom Hudson and Pirate Capital once did), but the main goal is to make lots of money for themselves and their investors.
If anyone else gets on the train and makes money as well, that’s not the driving force, but it can be our benefit…