Dole Update, Closed out partial position in Dole up almost 70% in 104 days

Dole today spiked up more than $2 per share at one point and ended closing today up $1.21 per share or 9.42% on the following news, the quoted text is from The Wall Street Journal Online:

Dole Food Co. Inc. said Wednesday it is in advanced discussions with Japanese trading house Itochu Corp. for the possible sale of its packaged-foods and Asian fresh fruit and vegetable businesses.

The California-based company, said no definitive agreements have been reached, and it continues to be in discussions with several other parties regarding these and other assets.

Dole said it divulged the talks in response to market rumors. Japanese business news provider Nikkei reported that Itochu is poised to purchase the U.S. firm’s businesses for as much as $1.7 billion.

Dole launched a strategic review of its businesses in May after reporting a slump in profits. The company said in July that it was considering a full or partial separation of one or more of its business, including potential spin offs, joint ventures and sales transactions.

Dole’s second-quarter profit fell 21% as the company saw lower fresh-fruit revenue, though sales of fresh vegetables and packaged foods improved.

After the news came out I sold just under half of the position I bought for a couple people’s money that I manage, cost basis around $8.50 per share sold around $14.50 per share, or up around 66% in just over 100 days since I bought it for them.  Here is the link to my first article about Dole that got published on June 13th on Seeking Alpha.

Dole Is Undervalued, Could Be A Winner From Spin-Off Or Asset Sale

I sold about half of the position because most of the margin of safety is gone and I wanted to lock in some profits in case the deal ends up falling through with Itochu.

I kept just over half the position because I valued Dole at the very low end at $18.25 per share and as high as $48.93 per share in June.  I also kept about half of the position because if any of the potential deals do go through then Dole will be able to pay off most, if not all of its massive debt which is Dole’s biggest problem at this time.  Also if it is able to pay off most or all of its debt, it could possibly start to grow its operations which could also help the share price.

Sometime in the near future I am going to start working on an updated Dole article and apply the knowledge and techniques I have learned since the original article.

Until next time.