Lone Star Strikes Again

Lone Star Funds has made headlines in Korea, Japan, Germany, and the U.S. Why? Because they're the ultimate bottom feeders. A "bottom feeder" is defined as an opportunist in politics or business.

Lone Star bought Tokyo Star Bank in 2001 for $400 million. They later sold the bank for around $2.8 billion. Most Koreans already know about the Korea Exchange Bank purchase in 2003. Lone Star paid $1.3 billion. They are currently in the process of selling the bank to HSBC for around $6 billion. AHBR, once Germany's largest mortgage bank, was taken over by Lone Star in 2005. Recently, they acquired $30 billion in CDOs from Merrill Lynch and only paid $6 billion.

In addition to distressed banks, Lone Star buys golf courses, restaurants, hotels, construction companies, supermarkets, mortgage companies, etc. What do they have in common? These companies were all near bankruptcy or desperate when Lone Star bought them.

We often say: "Hindsight is 20/20." This means that we can fully understand an event after it has happened. All of Lone Star's investments look brilliant now, but at the time, no one else bought these companies. There is no doubt these guys are very good at what they do, which is buying when no one else wants to buy and pouncing when the owners are desperate to sell.

According to Lone Star Fund investors, the fund has a target return of 25% a year. lol Unfortunately, the average person cannot invest in Lone Star Funds. (Wouldn't you like a 25% return every year?) However, we can learn from their strategy. =)