I'm Buying More Extendicare

Yes, it was only a couple days ago that my Special Situations portfolio purchased shares of Extendicare (NASDAQOTH: EXETF  ) , but I'm back for more in a big way. As soon as funds hit my account from one outstanding trade, I'm plowing all that money back into Extendicare.

What's to like?
As I detailed in my first write-up, Extendicare is a Canadian health-care company that has announced it's going to divest its American health-care unit through a sale or spinoff. But the market just isn't giving this company the value it deserves. In fact, my figures suggest that you're paying almost nothing at today's price for the American unit. That's odd since the American business should comprise more than half of the company's value.

The stock got hammered earlier this year when it cut its monthly dividend from $0.07 per share to $0.04. But the company explained that move was to align the payout with what its Canadian unit could afford. And the dividend change did that, but investors have largely overlooked the spinoff that should unlock significant value here. This is a typical Greenblatt special situation.

When will this divestiture happen? On the last conference call, management said that it intended to announce a deal by the end of the year.

Foolish bottom line
Extendicare is one of the best deals I've seen in a while and I'm putting my portfolio's money where my mouth is. With cash raised from a sale, I'll be putting about 30% of my equity into Extendicare as soon as I'm able, making it my largest position by far. Like it? Hate it? Join me on my discussion board to hash it out.

Interested in Extendicare or have another stock to share? Check out my discussion board or follow me on Twitter @TMFRoyal.

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