Earn 6% in the next 5 months (merger arbitrage)

[Shoe]

CKFR is currently trading at a 6 - 6.5% discount over its purchase price of $48 per share from Fiserv.

I feel I can earn more than 6.5% elsewhere in the mean time, so I won't be buying any CKFR, but for those who are looking to be more conversative with their money, this deal will provide you with a little over a 6% return by EOY. If you could keep finding deals identical to this one, the annual rate of return would be around 14.5%. Not too bad for so little risk.

[ahnuld]

obviously there is some fear priced in that the deal wont go through. I dont know specifics but there is no free lunch on something this big and on info this readily available.

[Tupacia]

Shoe,

People who do this (merger arbitrage) have much more experience than you do and frankly just know what they're doing. When an impending merger is going to happen at a specified price, the discount you receive is nearly always the exact amount of uncertainty of the deal going through. There is no such thing as a free lunch, especially when a single variable controls the majority of the stock price (probability of deal going through).

[DesertCat]

I've taken a 50% loss in a merger arb before when the deal didn't happen. The selling company then filed for bankruptcy. Nice lesson for me.

[emon87]

[ QUOTE ]
Not too bad for so little risk.

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lol

[brendanb438]

Seriously, Shoe has deserved a custom title by now. Something like BFI Court Jester would be perfect. This dude is like the reincarnation of Warren Buffett or something.

-Brendan

[Nonfiction]

[ QUOTE ]
Seriously, Shoe has deserved a custom title by now. Something like BFI Court Jester would be perfect. This dude is like Warren Buffett's retarded brother or something.

-Brendan

[/ QUOTE ]

[jws43yale]

I just love how Shoe is giving this recommendation but passing on it b/c he is sure he can do better than 6% in 5 months. How he still is convinced that with no prior investing experience he can beat the market without luck is amazing to me. I have overall beaten the market over a 4 year period, but over that time, half of my money was in index funds and the many losses I had in individual investments were outweighed by a few good (probably just lucky) picks. When you put 10% of your portfolio in AAPL at $36, it helps a ton.

I believe Shoe will never beat the market over an extended period unless Nintendo or some other stock that he heavily invests in goes on a multiyear run. So if he ran a "mutual fund" with a couple of 100 stocks instead of 25% in Nintendo or something he would never be able to.

[Shoe]

This one is as close to a done deal as you can get (in my opinion of course). I agree I am not a merger expert but am very familiar with both of these companies.

[Shoe]

Owning 100 stocks is not necasarily a good thing. If I ran a mutual fund I wouldn't add more stocks just to have more.