The first stock I'm buying in July 2021 is an arbitrage opportunity. With the S&P 500 $SPX500 at all time high and holding cash not being a good idea, arbitrage is a good alternative. The first stock I'm buying in July 2021 is Kansas City Southern $KSU which is a going to be acquired by Canadian National Railroads with a current spread of about 12% on the deal.
There are many catalysts on railroads right now such as higher inflation, a booming economy, infrastructure spending, and environmental issues. Kansas City Southern is going to be acquired in stock and transaction. It is a good deal for both companies as the new company will own a network spanning from Canada, through the US to Mexico.
The second stock I'm buying in July 2021 is Discovery $DISCA . It is a special situation stock as it will merge with AT&T's WarnerMedia $T .
The deal is a Reverse Morris Trust Transaction, in other words, AT&T will spinoff WarnerMedia which will then merge with Discovery. This is done to avoid taxes. 100% of Discovery shares will be converted into shares of the new company with Discovery shareholders owning 29% of it. $43 Billion of the debt of AT&T will be assumed by the new company. David Zaslav, CEO of Discovery, will be the CEO of the new company.
WarnerMedia owns Warner Bros Studios, DC, CNN, HBO,... while Discovery owns mostly factual TV networks such as Discovery Channel and the Food Network. This deal is going to create a Media giant hoping to compete with Netflix $NFLX , Disney and ViacomCBS.
The third stock I'm buying in July 2021 is Genworth Financial $GNW which will have a partial IPO for its Mortgage business, Enact. The merger that was supposed to happen between Genworth Financial and China Oceanwide did not go through, and therefore, this is no longer an arbitrage opportunity. But this IPO will unlock the value of Genworth as they are selling a $3.8 billion dollar while they themselves have a market cap of only $2 billion and there are so many tailwinds on the mortgage insurance business right now.
Even if we ignore the IPO, Genworth is a deep value stock with a market cap of $2 billion and a tangible book value of $15 Billion.
Watch the full video on YouTube: https://www.youtube.com/watch?v=UTLp5brWzXs&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=2
Here’s the full analysis of Discovery: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/32475061
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