I just want to maximize my profits... however i would want to consider buying some cheap puts going forward to hedge my exposure
@mergerpie take a look at the RILY/CALL deal. Its expected to close at the end of the month. RILY to pay 8.71 cash for CALL stock is currently trading at 8.47. They are just waiting approval from HSR. I cant see the HSR causing a problem here. I can't find to much news on this tho. Thoughts?
Some things I am looking at (no positions yet): XL (2.6% + div non-annualized) MPC-ANDV (1.7% non-annualized) CXO-RSPP (0.7% non-annualized) My positions: OA, PNK, AET, QCOM (still holding after it blew up), BGC, IPCC, KS, ORBK, MON (common + short puts)
My current positions are NXPI, TWX and TRCO. Guys, you can see my mid-year trading results at my blog page - http://www.mergerpie.com/mid-year-2018-review/ Overall its a quite successful half year for me
Do you have a market cap or a deal-size cutoff(e.g. do you only look at mergers of 100mm or larger)? Do you have a strong bias towards cash vs stock deals? How do you balance depth vs breadth of the book?
i have a very strong bias towards cash and mergers with bigger size buyers > 100 mil... these factors will influence the success of my merger strategy... 1. Cash deals - i only have to take position in the target vs share deals where i have to spend my margin in both the target and shorting the buyer (to protect against downside from buyer's stock). 2. mergers with buyers > 100mil - stronger buyers normally would be able to finance and finish merger deals more successfully (i do not have the statistics but this is my logical thinking..would love to do some statistics if i got the time). Any regulatory hiccups or market downturn can scuttle a small buyer's finances and so obviously size is a factor here. 3. I'm not sure what is depth vs breadth but for me, if i feel a deal like Monsanto which i understand the sector and the companies and is very likely to go through, i will go in with most of my buying power rather than spread out into many merger names with little understanding and knowledge. Of course I would like to spread out my risks as much as possible but I am an one man part-time operation and i currently do not have the time to analyse and follow 10 deals within a short period of time. I started increasing my positions in Monsanto in Nov 2017 and got very big in size (ultimately abt $800k value) only near Feb to Mar 2018 when EU was going to approve. That was when i thought the chances of approval was close to 70%. When i saw the divestment package for EU, i knew approval chances would be close to 90%. Even when rumors of DOJ delays hit Monsanto stock, I would not lower my positions as i knew only they only need to divest digital farming and some overlapping chemicals to get approval. As the many medium positions (abt $40k value worth each) in May 2018, i really didn't much time to study the mergers but the circumstances behind the increase in spread prompt me to enter the positions. However, i would never overload with all these mergers that i did not fully understand. Finally I would like to add that understanding the rationale of a merger, the intent and determination of the buyer and the willingness of the seller and sometimes even politics and geopolitical and country specific strategies are very important and quite often overlooked. One favourite example i like to tell is Syngenta and ChemChina... Back in 2016, rumors were floating about the Chinese government being reluctant for ChemChina to buy Syngenta with so much money and would like ChemChina to merger with SinoChem instead. Obviously these rumors are false if we analyse the Chinese government goal of promoting national champions and brands and getting cutting edge technologies. ChemChina buying Syngenta comes with the strategic goal of acquiring its genetically modified seeds expertise and if an investor understands chinese history, he will know that food and hence agriculture is one of the most important resource that will determine if the emperor can rule his empire for long. Hope that answers your question.