Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Make 22% Annually By Shorting Takeover Rumors

Bloomberg revealed a strategy that made 22% annually over the past 6 years by shorting takeover rumors. There were 1875 takeover rumors during the past 6 years- that’s more than one takeover rumor per trading day. By forming a rolling portfolio that’s short in companies that are takeover targets and that’s long the S&P 500 index, one could have achieved a 22% annual return. Since the portfolio will have around 20 companies in it, there is adequate diversification as well.


But this strategy can still be improved. It’s possible to develop a model which excludes those stocks which have the highest probability of being acquired. Portfolio managers and analysts can use their judgments to include the stocks with the most ridiculous rumors as well. On the long side of the portfolio, there are several strategies that can yield better returns than the dumb index investing. We have mentioned previously that monkeying insider purchases managed to beat the index funds by about 7 percentage points per year.

Bloomberg reports that only 14.5% of the companies were acquired. The stocks that were the subject of takeover speculation initially jump by 2.9 percent but lose 1.2 percent in the next month.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.