Lucking out a bit on Premium Standard Farms (PORK)

Value investing

Last November, I purchased shares of PORK at $18. If you recall, I’ve previously written about . It’s wobbled back and forth a bit since then, but never actually returned to $18, confirming my suspicions of paying too high a price.

On Friday, the stock abruptly jumped almost 7% to close at $17.73, about the closest it’s gotten to my purchase price since I bought it, and today it was revealed that . If approved (and there might be some antitrust concerns), PORK shareholders would receive 0.678 shares of SFD and $1.25 in cash for every share they hold. SFD is currently trading at about $28.50 or so, which would make each share of PORK worth around $20.57 or so. I’m inclined to sell on the news announcement later today, especially based on my experience with PORK so far. (Update: I sold my shares at $20.40.)

I’ll be honest and say I think I lucked out on this investment in terms of not having to realize a loss on it. I’d concluded a while ago that until I know more about what I’m doing, large-cap value plays might be safer choices (assuming there are any to be found), but this has been a nice surprise. The unfortunate reality, however, is that I doubt I’d be able to consistently identify small-cap companies that will be acquired by their larger competitors to the extent that I could make a consistent return on them!


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All this industry consolidation’s great, but what’s next? | Experiments in Finance

[…] Being relatively new to making my own investment choices, I find it sort of astounding that two of my previous choices have also benefited from ongoing industry consolidation as well. Just a couple of months ago, Smithfield Foods (SFD) announced it was purchasing Premium Standard Farms (PORK), a purchase I’d made last year and had concluded I’d bought at too high a price. […]