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Alpha: Simon Thompson finds private equity value

This company is recycling cash into new investments and has potential to generate double-digit returns.
Alpha: Simon Thompson finds private equity value

It's sensible to build a margin of safety into the price you are willing to pay for equity in any company. Investment risk can be mitigated further when the company is sitting on a cash pile to minimise potential downside risk. 

In the case of the private equity firm revealed in this report, the value of its quoted securities and cash on the balance sheet back up 60 per cent of its market capitalisation, meaning legacy investments being sold down are thrown into the price at 61 per cent below what is a realistic carrying value in the 2018 accounts. As these assets are sold, and cash is recycled into new investments, the company's huge share price discount to net asset value should narrow markedly. 

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