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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • The Barbarians At The Gate At A Discount 8 comments
    Dec 17, 2013 2:02 PM | about stocks: KKR, KKR

    KFN was a long idea that started in August 2009 at a price of under $2.50. It was trading at a massive discount to NAV at the time. Our analysis indicated that it was worth more than twice the market price. We thought that there was about a 70% chance that it would reach its NAV of $5.69. Here are the early results:

    (click to enlarge)

    Another separate but affiliated KKR investment vehicle that was also an investment idea of ours, KKR Private Equity Investors, has already been absorbed into KKR. Earlier this week, KKR announced that they are buying KFN for KKR stock. We support the deal and assume that a majority of KFN holders will too. The deal should close by the end of May 2014 and the $0.48 net spread implies an annual net return of slightly above 8%.

    Stocks: KKR, KKR
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Comments (8)
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  • TimeOnTarget
    , contributor
    Comments (2175) | Send Message
     
    Chris --

     

    Did you ever write anything about how you found out about these guys and how you decided that they were going to be solid?
    18 Dec 2013, 08:33 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » We were quite invested in the syndicated debt market in 2008-2009 and I am always looking to start research projects into equities that are at deep discounts to NAV. That was the beginning. In this case, it was a bit easier in that I also have admiration and friendship with many of the people at KKR and that was relevant in forming a theory that they would do what they could to make these vehicles into good investments. That and the fact that there was good insider ownership.
    18 Dec 2013, 09:02 AM Reply Like
  • eric greene
    , contributor
    Comments (28) | Send Message
     
    Chris,

     

    You are missing the fact that KFN and XCO have a 300 well drilling deal that just started. The results are preliminary but it is going to make KFN a whole bunch of money. KKR saw this a bought them out in the middle of tax loss season. True Barbarians!
    22 Dec 2013, 04:19 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » Maybe I will reconsider. Thanks for the note. This could be an appraisal opportunity.
    22 Dec 2013, 04:49 PM Reply Like
  • TimeOnTarget
    , contributor
    Comments (2175) | Send Message
     
    Chris --

     

    If so, you should check this out:

     

    http://seekingalpha.co...

     

    A significant portion of my background and my interests are in the O&G industry. I consider Richard Zeits to be by far and away the best E&P analyst I have ever seen. Even though he doesn't give explicit advice here on SA, you can read between the lines-- pretty easily.

     

    Zeits is an ACE. You and he are the two people here on SA who I try not to miss a single word you write.

     

    If you wind up getting hold of more detailed info that you want looked at, let me know. I know a little and I have friends who know a lot.
    23 Dec 2013, 12:37 AM Reply Like
  • bazooooka
    , contributor
    Comments (2324) | Send Message
     
    Chris, any thoughts on some good option plays to leverage this deal? Would you sell in the money puts?
    23 Dec 2013, 04:13 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » Good question. Writing Jan $12 KFN puts for $0.15 or so would probably not be a terrible idea.
    23 Dec 2013, 11:08 AM Reply Like
  • eric greene
    , contributor
    Comments (28) | Send Message
     
    Chris,

     

    Do your research. Google "Buda Sweet Spot XCO" and you will see how undervalued KKR's .51 offer is. The oil is bubbling out of the ground on the 30 exploratory wells. It is very important that KFN share holders do any and everything possible to delay the merger. The results of the XCO partnership will eventually be released. I am content to get a 7% dividend and wait. Also see my comments under seeking alpha article about KFN / KKR merger December 22nd article.

     

    These great opportunity are a rarity. As a KFN share holder I want to benefit. I love KKR but they are not a nonprofit organization. They saw the opportunity and did something about it. Now it is my turn!
    23 Dec 2013, 08:40 AM Reply Like
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