Special Situation Investing

Friday, November 17, 2006

Updates: TTWO, WEN, WZEN

Well just thought I would go over some of the more recent events that have affected the stocks I follow. Here goes:

Take Two Interactive (TTWO) - Take Two Interactive has had a hell of a week. It started trading at $16 and was over $18 yesterday. Sony's PS3 is coming out, word is out that ICahn upped his stake to 2.9 million shares from 800k, and investors are just getting pumped on video game companies in general. I already mentioned it before but there latest game Bully is no slouch either. However, at this point I wouldn't buy anymore. I am not going to sell either but those of you who are short-term probably should consider it. TTWO still has some large issues and it could take awhile before sales turn around. In the short-term the stock could head just about anywhere. However, due to tax reasons as well as my fundamental belief that the company can produce quality games and overcome existing legal issues I am going to hold. Just be aware that it is not cheap and that my reasons for holding it are more subjective than purely analytical.

Wendy's (WEN) - Announced that the full 19% of outstanding share for a modified Dutch auction have been tendered. In other words, it looks like the previously announced share repurchase will go through. The company will be scooping them up at $35.75, or towards the top of their target $33-36 range. The market socked WEN on the news, bringing it down over 6%. I consider this a buying opportunity. While I would have preferred a lower average purchase price, I still think the deal is in existing shareholders favour and I will continue to hold my shares.

Webzen (WZEN) - The company got whacked this week. An anlalyst downgraded the stock to neutral and the stock closed down at $3.59. There was also an announcement that there upcoming online game, Soul of the Ultimate Nation, will be provided free with revenue coming from purchases of in-game items or micro-payments. I don't imagine most Wall-Streeter's could get too excited about that. However, this can be a successful model as the upgrades are generally priced quite cheap and players regard extra purchases as insignificant. You can also generate a keeping up with the Jones atmosphere. At this point, I think you have good risk/reward. Now there are a real risks with this one, well with any stock really, that things may not go as planned. However, you're buying for just over book and any reasonably successful game should cause the stock price to soar.

Do your own research on these and all stocks mentioned on this blog.


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