Since we started Max Wealth, we have discussed a lot of ideas and concepts regarding making money in the stock market.
So far, we’ve recommended two actual investments, Colony Capital (CLNY) and Star Gas Partners (SGU). These are two of my favorite stocks to own right now, and I have no intention of suggesting selling either of them for a very long time. I think those of you who join this adventure will make an enormous amount of money in the years ahead.
Founder of Colony Capital Is on a Mission to Quadruple His Stock
Let’s look first at Colony Capital.
There have been significant changes at Colony Capital. As I anticipated, founder and Chairman Tom Barrack is coming back as CEO to repair the mistakes made by the post-merger management team. He said back in March, when it became clear that the management team was not up to the challenges of executing the merger and subsequent operations of Colony, the following:
“I am 100% focused and still one of the large personal shareholders of this company, it’s majority of my personal net worth, it’s the dominant factor in my, and my family’s pride, reputation, and future, and I don’t intend to leave it tainted or unattended.”
Apparently, he has seen enough and has decided to take the reins himself once again. This is fantastic news for us as outside shareholders. Mr. Barrack made billions using his aggressive approach to real estate and private equity investing, and he will now use those talents to restore the damage done by the botched merger.
He is off to a good start. They have sold over $1 billion of non-core assets and plan to sell a billion more next year. This money will be redeployed into areas of the market like industrial and digital real estate that have much higher return profiles. He cut over $50 billion on overhead costs and is looking at areas where more fat can be trimmed out of the company. He is also moving to expand the very profitable investment management business.
He outlined his immediate plans on the most recent conference call, telling investors the following:
“Digital infrastructure, light, and bulk industrial and emerging markets are total return-oriented asset classes you can expect Colony to redeploy the massive liquidity, which we will generate from asset sales in the coming year. We’ve executed on the defense. We’ve introduced the beginning of a new offense, the results of which are starting to emerge and the newly aligned management structure will leave us positioned for more opportunistic capital allocation focus and a much-condensed timeframe.”
For Mr. Barrack to recover the money he has lost due to past management mistake, the stock has to quadruple from its current level. As he said earlier this year, it’s not just the money, it’s his legacy he wants to rebuild. Achieving these goals for himself will make us an enormous amount of cash.
For 20% Returns, Star Gas “Chugs” Slowly but Surely
Now let’s take a look at Star Gas Partners.
Over at Star Gas, things have been a lot quieter, and that’s just what the doctor ordered. Star Gas just chugs along buying new propane and heating oil businesses. They bought two in the last quarter. And this has grown the company, the profits, and the dividend. The cold weather in the northern part of the country is going to give sales a boost as well, so that should be a good source of profits in the near future.
The stock is yielding 4.7% right now, and we can expect that to go higher in the years ahead as they continue to roll up Mom and Pop heating oil companies across the United States. They are also buying back stock and in the third quarter of the year repurchased 1.1 million shares. The current buyback plan has over 3 million shares remaining to be repurchased.
This is not a stock that is exciting to follow. As I said, Star Gas just chugs along taking care of business and growing the company by making smart deals. It is, however, the kind of stock you look at after owning for a long time and realize that it has made you an awe-inspiring amount of money.
I went back and looked at the very first time I wrote an article recommending this stock, and it was on April 12th, 2012. Investors who jumped on this stock since I recommended it have seen average returns of over 20% a year since then. That’s more than most if not all hedge funds, money manager, and so-called genius investors out there. Star gas has bored us all the way to the bank!
Insiders have an excellent reason to keep up the superb work. They own 20% of the company, so for them to keep growing their fortune they have to increase ours as well. I am a big fan of skin in the game investing, and these folks have plenty.