Investment in stock index funds dwarfs prior secular peaks. When you own an Index Fund you’re also indexed to take major losses along the lines of 30% or more on average in a sustained bear market.
Active managers can switch gears and realign portfolios to benefit from bear markets.
The underlying methodology of our quantitative equity models is to identify companies/stocks that are very attractively priced – including debt- so as to be potential targets for acquisition.
One such holding Wilshire Bancorp symbol WIBC announced today that it will be acquired by BBCN Bancorp for $13 a share.
Lets take a look at the valuation of WIBC pre-merger:
Enterprise Value: $651m
EBITDA (trailing 12 months): $101.3m
Earnings Yield: 15.5%
On of the factors that made WIBC so attractive and why using Market Capitalization as the basis of valuation incorrect was the fact WIBC has $6.52 a share in cash and very little debt. The cash can then be used to reduce the cost of acquisition.
No longer long WIBC
Our November client letter.