Jeffrey Hirsch, editor of Stock Trader's Almanac, chose Global Brass and Copper Holdings (BRSS) as his favorite investment idea for 2019. Here's his latest update, following the firm's announced merger plans.
At the outset of 2019, Global Brass and Copper Holdings was poised for an upside move for two main reasons: seasonality and valuation. BRSS produces copper and copper-alloy products and is our favorite small cap stock that is highly correlated to copper. For years, the stock has tracked the price of copper futures closely.
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BRSS held up better than other copper stocks during the Q4 market and copper rout and the company boasts a solid business because of its use of recycled material and the value-added nature of their products.
Both copper and BRSS hit their usual seasonal low on cue last December 2018 with copper hitting its ultimate low on January 3, 2019. Copper and BRSS rallied together into April and then copper began its seasonal slide in mid-April. But the share price of Global Brass and Copper has remained near its high.
It was right around this time that the company announced an historic merger agreement with the Wieland Group, a 200 year old leading global supplier of copper and copper-alloy products.
On April 10, 2019, Wieland Group and Global Brass and Copper announced a definitive merger agreement where Wieland will acquire all of the outstanding shares of Global Brass in an all-cash transaction. Global Brass and Copper shareholders will receive $44.00 per share in cash.
Since these mergers can always fall through and this is an all cash deal the benefits to sticking around for a few more pennies per share do not seem worth it. There is still the same $0.36 per share annual dividend, but with BRSS stock currently trading just a nickel below the $44 cash buyout price, the yield is 0.8%. You can get more than twice that from an online savings account. Plus, the bullish copper season is over until December.
So sell BRSS now and put the capital to better use. Cash will be king this summer as a lofty market enters its Worst Four Month span July-October. There will be better opportunities in later in the summer and fall. And if the deal falls through BRSS will be more attractive at lower prices ahead of coppers seasonal December-April bull-run.
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