This post by MOI Global instructor Phil Ordway has been excerpted from a letter of Anabatic Investment Partners, based in Chicago, Illinois.

Phil presented his in-depth investment theses on Armstrong (NYSE: AWI) and USG (NYSE: USG) at Best Ideas 2016. Replay here.

Armstrong (AWI) is performing well and should soon provide some clarity on its capital allocation plans. As noted in January, Armstrong has agreed to sell its international assets to German building products company Knauf. The sale should close this summer and bring $250 million of net cash to AWI. The allocation of that capital, along with the hundreds of millions of dollars of free cash flow the remaining business will generate over the next few years, will go a long way in determining our investment prospects.

Speaking of Knauf, it recently announced its purchase of USG, Armstrong’s U.S.-based competitor. Knauf plans to keep USG’s brand, strategy, headquarters, and operations. It seems unlikely – for now – that Knauf’s ownership will bring any material changes in competition from Armstrong’s perspective, but it bears watching.

Gross Long and Gross Short performance attribution for the month and year-to-date periods is based on internal calculations of gross trading profits and losses (net of trading costs), excluding management fees/incentive allocation, borrowing costs or other fund expenses. Net Return for the month is based on the determination of the fund’s third-party administrator of month-end net asset value for the referenced time period, and is net of all such management fees/incentive allocation, borrowing costs and other fund expenses. Net Return presented above for periods longer than one month represents the geometric average of the monthly net returns during the applicable period, including the Net Return for the month referenced herein. An investor’s individual Net Return for the referenced time period(s) may differ based upon, among other things, date of investment. In the event of any discrepancy between the Net Return contained herein and the information on an investor’s monthly account statement, the information contained in such monthly account statement shall govern. All such calculations are unaudited and subject to further review and change. For purposes of the foregoing, the calculation of Exposure Value includes: (i) for equities, market value, and (ii) for equity options, delta-adjusted notional value.

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