Fortunes in Special Situations in the Stock Market

Schiller (Investor’s Guide to Special Situations in the Stock Market, 1966, etc.) offers a guide to investing during specific corporate situations.

This revised investment guide, whose first edition was originally published in 1961, aims to help readers uncover and take advantage of particular events within companies that, with good legwork and timing, can result in profit. Such “special situations” include mergers, liquidations, and spinoffs, and the appeal of trading based on such activities is that it doesn’t rely on broader trends in the market but on companies’ specific actions. It’s a strategy that requires investors to do their homework in order to fully understand the company of interest and the action that may or may not take place. The easy part, though, comes in knowing when to divest, as Schiller points out: “A prime rule of special situation trading is to get out when the anticipated action has occurred.” Added to the author’s original 1960s-era advice in this edition are case studies of modern transactions. One contributing investor, Perea Capital partner Omar Musa, writes of a special situation involving a company in Turkey in 2013; with research, he came across “a long-term compounder that offered an enormous margin of safety.” Although the book can certainly be dry at times, this lack of pizzazz is part of its appeal, as the author and his modern-day supporters are offering sound, straightforward advice: do your research and know what’s going on with the companies in which you invest. There’s no magic to this process—it’s simply a matter of acting at the right time, based on the right information. Although the book certainly mentions the potential for big gains, it’s also understood that careful scrutiny is required to achieve such results. Schiller’s work requires careful reading, but it ultimately proves to be a highly reasonable starting point for investment, driven not by algorithms but by actual events.

Intriguing investment advice that’s as pertinent to the market today as it was decades ago.