Friday, June 03, 2005

Hit #45

L-3 today formally announced that it is buying Titan (TTN), the defence contractor, for around $2 billion. This deal has been in the making for a while now.

An earlier attempt, last year, by Lockheed Martin to buy Titan was aborted after Titan was associated with a bribery scandal. That news had sent Titan stock to a low of around $14/share before it started recovering.

I had bought Titan before the scandal surfaced, at $21.75/share. My plans to average down, once the scandal hit, could not be implemented as this holding was in a portfolio that I was managing for a friend who refused to believe that this was worth buying on a pullback!

While today's offer at $23.1/share does represent a 6% premium over the average cost, it is a huge missed opportunity! I would have liked to buy aggressively, reasoning that a Republican administration would not allow a defence contractor to be indicted/forced to file for bankruptcy, especially with low-intensity wars being waged in Iraq/Afghanistan.

This strategy, to buy more on market mispricing, is hard to implement, but when done carefully, is very rewarding.


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