Famed investor Warren Buffett once said, “It’s only when the tide goes out that you learn who has been swimming naked.”
In other words: An investment may appear promising up to a point. If the company you invested in is too leveraged and the tide turns, everything becomes exposed. And the investment gets spoiled.
Tim Melvin has never been caught swimming naked.
What Happened: Melvin has been in the finance industry for more than 30 years. He founded Thunderclap Research, which focuses on a little-known strategy in the equities market. Here’s what he does:
- Buys smaller banks that are underperforming but have strong balance sheets and pristine loan portfolios at less than the book value of the business.
- Waits until the bank gets acquired or merges with a competitor.
- Sells at a price that can be several multiples of what you originally paid for.
Why It Matters: Melvin has closed 67 trades — according to his website — and never lost a dime.
Most recently, Melvin had a focus on Peoples Bancorp Inc. PEBO and Limestone Bancorp, Inc. LMST.
Adding another win to his strategy, shares of Limestone jumped 30.79% over the last five days as the company announced it would be acquired by Peoples Bancorp in a transaction valued at approximately $208.2 million.
“The proposed deal price we will have a total return on our shares of about 33% annually,” Melvin wrote in his newsletter.
Follow Melvin’s trades, and check out his newsletter.
Image and article originally from www.benzinga.com. Read the original article here.