Small Cap Stocks

Note: Since this is a watch list stock, we have only provided an investment summary.

If you’ve been following our stock picks, you know that we occasionally recommend investments in M&A risk-arbritage situations. Specifically, we recommend taking stakes in companies that have an existing acqusition offer on the table and the stock is trading well beneath the existing acquisition price. PCNTF and STLW, two stocks that we recommended and continue to hold, were examples of this type of situation.

Additionally, if you’ve been reading our blog from some time, you also may know that we made subscribers a significant amount of money in the last year by recommending investments in seismic data companies. These companies offered the perfect combination of post-bankruptcy restructuring situations, favorable industry dynamics, M&A activity, and low Wall Street research coverage. Seitel (SELA.ob) was our top pick in the seismic sector and it rewareded us nicely.

We continue to hold Seitel (SELA.ob) and we want to remind investors that in August 2006, ValueAct Capital offered to buy the company for $3.65 per share. In the interim oil prices have plummeted and Seitel’s stock price has dropped beneath ValueAct’s offer. Without getting into detail here, we think that should the stock trade at a more than 10% discount to the offer price, or about $3.25 per share, the stock will start to offer an interesting trading opportunity. Can this happen? We’re sure that it can given the continued pessimism towards oil-related shares.