Alert: Corning To Buy Company I’ve Recommended
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While working at the investment newsletter from September 2014 to February 2015 I recommended three companies to subscribers.
I wrote in my 2014 and 2015 Value Investing Journey and Press On Research Portfolio Reviews that while I couldn’t reveal the research or the names of those companies. I may write new research reports about them at some point in Press On Research.
While doing research on them to write-up in Press On Research one of them ended up agreeing to a buyout offer from Corning (GLW).
Alliance Fiber Optic (AFOP) agreed to the buyout price of $18.50 per share. A 22% premium to what I recommended the company at.
I can’t release the full analysis article I wrote but in short my thesis on the company was that it was undervalued by 22% to 65%. That it had some minor competitive advantages. That there was a huge $140 billion trend in the companies industry that could explode its shares. And it crushed bigger competitors in terms of profitability.
Just to name a few margins that were spectacular it produced a 19.3% FCF/Sales Margin. Had an ROIC of 34%. And had an unlevered return on net tangible equity of over 100%. The only time I’ve found a company whose margin was above 100%. And this means it’s one of the best run businesses on the planet.
And this still wasn’t all…
Insiders owned 14% of its shares. It paid a 1.2% dividend. And planned to buy back 6% of shares outstanding.
I loved this company. And its profitable operations were some of the best I’ve come across when evaluating companies over most of the last decade. Especially considering it was only a $250 million company.
The buyout price of $18.50 per share in cash from Corning is a low-ball offer though.
AFOP is worth between $20 and $25 per share with no growth expected. And like I said above there’s a huge $140 billion trend in the companies industry that could explode its growth and share price further.
At this point I’m not sure if shareholders will fight or not but lawsuits have been filed by at least two different law firms saying AFOP insiders breached their fiduciary responsibility to shareholders by not seeking a higher price.
I agree the price AFOP agreed to is low. But it’s not egregious so I’m not sure if these lawsuits will continue or if shareholders will get any money at some point.
Either way the subscribers of the investment newsletter I worked for will gain ~22% in 14 months owning this great company.
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Value Investing Journey
Press On Research
Author of How To Value Invest
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