Tribune Takeover Closes
The Tribune takeover closed successfully today. Tribune shareholders will receive $34 (not sure how soon) and I'm satisfied with how my strategy was executed. This deal basically saved me this year (I would be posting greater losses for this year otherwise).
Unfortunately--but this goes for almost 2/3 of my investments--the Canadian dollar appreciated quite a bit and shaved around 8% off returns. This is somewhat dissapointing but I'm not too worried because I think the US$ will start to strengthen some time over the next few years (there is a potential for capital flight if there is a crisis somewhere--often there is when the US economy slows). This was my first "good" risk arbitrage position and I'm glad to have learnt lessons about currency fluctuations and the takeover process. One thing I learned is that it is likely not worth considering risk arbitrage in foreign currencies unless the potential return is 15%+ (assuming you are not hedging to your currency (small investors like me generally won't)). I think I am improving my risk arbitrage strategies and hope to make it about 20% to 30% of my portfolio in the future. Future deals I'll be looking into include the BCE (BCE) takeover, Clearchannel (CCU) takeover, and the CommerceBankcorp (CBH) takeover.
Once I get the money, I'll face my next decision... and the next big decision may end up being the riskiest financial decision of my life in $ terms (in % of net worth terms, I have made scarier decisions before when I had less money :) ). I'm thinking of investing around 20% to 30% of my portfolio in Ambac (ABK). But I'm still uncertain. I'm also not sure whether I should only invest some money, with the rest later; or whether I should invest 15% or so, with the rest going to other opportunities I'm looking at (risk arbitrage, OCWAZ, PHM, Japan, etc).
TRB sale price (closing price): $34
Purchase price: varies (average around $28)
Total Return (US$ terms): 20%
Total Return (CDN$ terms): 13.67%
Unfortunately--but this goes for almost 2/3 of my investments--the Canadian dollar appreciated quite a bit and shaved around 8% off returns. This is somewhat dissapointing but I'm not too worried because I think the US$ will start to strengthen some time over the next few years (there is a potential for capital flight if there is a crisis somewhere--often there is when the US economy slows). This was my first "good" risk arbitrage position and I'm glad to have learnt lessons about currency fluctuations and the takeover process. One thing I learned is that it is likely not worth considering risk arbitrage in foreign currencies unless the potential return is 15%+ (assuming you are not hedging to your currency (small investors like me generally won't)). I think I am improving my risk arbitrage strategies and hope to make it about 20% to 30% of my portfolio in the future. Future deals I'll be looking into include the BCE (BCE) takeover, Clearchannel (CCU) takeover, and the CommerceBankcorp (CBH) takeover.
Once I get the money, I'll face my next decision... and the next big decision may end up being the riskiest financial decision of my life in $ terms (in % of net worth terms, I have made scarier decisions before when I had less money :) ). I'm thinking of investing around 20% to 30% of my portfolio in Ambac (ABK). But I'm still uncertain. I'm also not sure whether I should only invest some money, with the rest later; or whether I should invest 15% or so, with the rest going to other opportunities I'm looking at (risk arbitrage, OCWAZ, PHM, Japan, etc).
TRB sale price (closing price): $34
Purchase price: varies (average around $28)
Total Return (US$ terms): 20%
Total Return (CDN$ terms): 13.67%
I am glad you are please with your trading! It is important to feel good about what you are doing. Trading mergers is a very emotional thing! I get my merger data from www.madmergers.com!
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