It turned out to be an interesting week on theRead More
When a company agrees to merge with another company of a similar size or get acquired by a large company, the target company typically trades at a discount to the acquisition price. Here at Inside Arbitrage, we have the best tools and content to help you capture that discount, otherwise referred to as the “spread.” Some of what we offer includes:
You can try out our Merger Arbitrage Tool below and view the top three deals with the largest spreads…
Inside Arbitrage is an idea discovery platform. We provide institutional quality investment tools and research to investors that focus on specific events. These events could be transformative events such as one company merging with another or a simple one such as a company insider purchasing the company's stock on the open market. Inside Arbitrage provides up to date information for various event-driven or special situations strategies like merger arbitrage, spinoffs, legal insider transactions, stock buybacks and SPACs. We also track management transitions and the portfolios of investment gurus through their 13F filings.
At Inside Arbitrage we have created custom screens that bring together signals from some of the strategies we follow or highlight a group of people that have a history of being right. Our Double Dipper screen identifies companies that are buying back their shares while their insiders are independently buying stock on the open market for their own portfolios. Our Spinsider screen looks for spinoffs where members of the management team (CEO, CFO, COO, SVP, etc.) are buying shares through open market purchases.
Institutional investors and fund managers that are managing more than $100 million in assets have to file a form with the SEC called the 13F within 45 days after the end of each quarter. This filing provides a small window into the fund manager’s portfolio and is a great source for new investment ideas. The Gurus section of Inside Arbitrage includes curated lists of professional investors and fund managers categorized based on their investment style.
Event-driven or Special Situations funds invest in one or more strategies including but not limited to risk arbitrage, spinoffs, special purpose acquisition vehicles (SPACs), warrants, bankruptcies, etc. We have identified a curated list of funds that are either dedicated to these strategies or use them for a portion of their portfolio.
It is sometimes difficult to classify a fund under one investing style and in those cases, we may have the same fund listed under two or more categories. Investing styles also evolve over time and a fund that was event-driven focused may decide to adopt a different strategy.
We reviewed the fund websites, looked at SEC filings and reviewed the holdings of these funds to classify them into one or more categories but you can draw your own conclusion by clicking on the name of a fund to pull up their portfolio as of their last 13F filing.
Beyond the 13F filings, we have also incorporated 13G and 13D filings as well as form 4 insider filings. Funds are required to file a 13D or a 13G within 10 business days of acquiring a 5% position in a company. Funds are considered an insider if they own more than 10% of a company and are required to file a form 4 within two business days after a transaction.
For each fund, we have included new additions, stake increases, stake reductions and the complete sale of a position in separate tabs. You can also click on the "View All
If you have suggestions for additional funds we should track, we would love to hear from you.
A fund that acquires a 5% position in a company and that plans to influence the management or the direction of a company is requited to file a 13D with the SEC. The 13G filing is required for a 5% owner if they plan to remain passive.
Activist funds could be hostile to management with plans to get their own candidates elected to the Board of Directors or firms that collaborate with management to effect change. Good examples of the former are Elliott Investment Management and Carl Icahn, while good examples of the latter are Starboard Value and Third Point.
Activist funds play an important role in financial markets by effecting necessary change and investors follow activist positions with a lot of interest.
Value is in the eye of the beholder and a company that trades at a premium multiple to the average P/E of the S&P 500 could be considered a value stock if its margins are high and the investor believes its future prospects are significantly better than the market is anticipating.
Other value investors might focus on companies that are trading at low multiples by looking at their favorite comparative valution metrics like price/earnings (P/E), price/tangible book, EV/EBITDA or Price/FCF. A third group might prefer building detailed financial models and then running discounted cash flow analysis using bull case, base case and bear case scenarios.
Value traps are their nemesis and many of these investors pay a heavy price battling this nemesis before they start to identify them from a long distance and steer clear.
My favorite kind of investors. A company is like a living organism that is either growing or on its path to oblivion. These folks don't mind paying up a little if they can find a growth stock that is temporarily being discounted on account of an adverse event or an earnings miss.
Stocks that were formerly in the growth camp, might be temporarily in the growth at a reasonable price (GARP) camp on their way to value territory. These are best avoided if you can identify them in advance, which is no small feat.
These investors are drawn to rapidly growing companies. A mistake in valuing a company can be easily forgiven if the company continues to grow rapidly. Investors with a growth focus are willing to suffer a few quarters or years of bottom line losses to realize an eventual payoff. Think the "Tiger Cubs" of the investing world.
Volatility is a feature of this style of investing and not a bug. Broadly diversified portfolios could help smooth the roller coaster ride but we have seen highly concentrated growth portfolios.
These are funds that are difficult to pin down to a specific style or belong to categories we have decided not to separate out into their own group. You will find your quantitative funds with thousands of positions (D. E. Shaw and Renaissance Technologies for example), the healthcare focused funds (Baker Bros. Advisors and Orbimed Advisors), the energy focused funds (Alps Advisors and Chicasaw Capital) as well as famous hedge fund managers that now run family offices (Soros, Paulson and Druckenmiller to name a few).
Subscribing to Inside Arbitrage is like having your own hedge fund COO to help generate ideas and monitor events at a fraction of the price.
I can’t remember exactly when I came across Asif, but I imagine it was back at least 15 years ago.
Why have I followed him for so long? He finds interesting companies that often times I’ve never heard of, but by the time I finish reading his analysis of the company, it seems I am as informed as I could be.
I have been a subscriber to Inside Arbitrage since 2018. I have found the service extremely useful and I consider it a “must have” for anyone investing in merger arbitrage and other event driven strategies. Asif Suria and his team are always making improvements to the service and have a real commitment to their subscribers. I am pleased to recommend Inside Arbitrage to anyone interested in event driven investing.