Although focused on long-term value, North Circle Advisors will exploit temporary mispricings to open positions. For example, portfolio manager Bill Bradley pegged LIM Corporation’s fair value per share at $28 yesterday; however, LIM’s stock price seems to have overreacted to a competitor announcement prior to market open today. The follow events unfold over the course of the morning:
- PRIOR CLOSE: LIM closed at $30.05
- PRE-MARKET: LIM priced at $20.34
- MARKET OPEN: LIM opens at $22.15
- 10:00 AM: LIM trading at $23.01
- 10:00 AM: Bradley confirms the overreaction with target price of $28
- 10:05 AM: Bradley instructs trader to buy 25,000 shares, with a limit price of $28 when LIM is trading at $23.09
- 10:22 AM: Trader finishes the buy with an average purchase price of $23.45
Bradley and the trader conduct a post-trade evaluation. In picking an appropriate reference price, the trader asks Bradley if that would be a pre-trade, intraday, post-trade, or price target benchmark.
