Buying Back into Heidrick & Struggles

Buying Back into Heidrick & Struggles

By Paul Price

Sometimes the best new idea is an old idea.

We sold the shares of executive search firm Heidrick & Struggles (HSII) at $17.37 per share on July 5, 2013. Today we were able to buy back a position at $14.94, a 14% discount to where we sold just twenty-four days ago.

We picked up 250 shares for our Virtual Value Portfolio.  The $3,735 cost came out of our cash reserves. Market Shadows will pocket a quick cash rebate on this purchase as HSII goes ex-dividend for a 13-cent distribution on Wednesday.

HSII   Jul. 29, 2013

At least two private equity firms had been interested in taking HSII private at valuations ranging from $17 – $19 per share. Management says they are committed to staying independent. Experience suggests that might be code for "Make me a higher offer."  That is exactly what happened earlier this year with another of our previous portfolio companies, Life Technologies (LIFE). They turned down multiple bids initially before accepting a later, higher priced offer.

Price negotiations asides, I think HSII is worth well above the sub-$15 we paid this morning to add it back to our Virtual Value Portfolio. The shares have traded higher than that over most of the past decade.

HSII  10-yr. chart (weekly)

The buyout firms were convinced they could profit from privatizing the company at higher levels. 

We can pocket almost 4% in yield while waiting for the mean-reversion price that should evolve over the next full business cycle. Another buyout rumor or takeover would speed up the process.

See full details of all open and closed-out positions: http://marketshadows.com/virtual-portfolios/virtual-portfolio/

Disclosure: I bought HSII shares in my personal portfolio today (July 29). My cost ranged from $14.92 – $14.94.

 

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Comments

  1. Microsoft hires HSII to find the next CEO to replace Balmer!
    http://finance.yahoo.com/news/microsoft-ceo-ballmer-retire-within-131209911.html

    Surprising, but this news did not make affect the stock price (or volume) almost any

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