Why I'm Selling My Visteon Warrants

While Visteon still looks good, I see better reward for the risk elsewhere

James Royal
Jim Royal
Jul 10, 2014 at 2:43PM
Industrials

It's been a nice run in Visteon Corp (NASDAQ:VC) warrants (NASDAQOTH:VSTOW), and the position is up about 40% since my Special Situations portfolio acquired a stake in early January. That's not bad, and it would have been much better if I had purchased just a day earlier, just before a positive research report from one of the investment banks spiked the stock and warrants. Woulda, coulda, shoulda... But after this run, I think there's better reward for the risk in other stocks, and so I'm selling my Visteon warrants.

More upside in Visteon
Visteon has made some nice moves, selling slower-growing business units and focusing on faster-growing units. I'm also a huge fan of the proposed stock buybacks, including the $500 million accelerated buyback announced in May. Most of that was completed by the end of that month. Overall, the operational moves have simplified the business and the financial moves have created value for shareholders, so it's great to see.

My decision to sell has everything to do with other great opportunities that I see out there, with lower downside and substantial upside. And with the run-up in Visteon, I just don't see the kind of reward for risk that I do in these opportunities.

Foolish bottom line
So on the next market day, my Special Situations portfolio will sell its stake in Visteon warrants. I'm looking to redeploy the funds in a high-yield stock -- a nearly 9% yield -- that I think could return up to 50% overall over the next year. If you'd like to know what that stock is, follow me on Twitter: @TMFRoyal. And check out my dedicated discussion board.