WWII 126: What I Would Do Differently if I Could Start Over, $RMGN and Responding to a Falling Price
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Main Topic: Answers to Your "Ask JB" Questions...
In this episode of the podcast, I catch up on questions submitted through Ask JB. First, thank you to everyone who took the time to submit a question...I really appreciate you.
Second, what a great batch of questions! Here are the questions answered on this episode:
From listener Dan:
I am curious, if you had a do over with your life in investing, if you would go about building wealth in a different way? This question may be taken as partially a lifestyle/personal preference question so I guess it might be hard to say.
There are a few attitudes or strategies people use outside of asset allocation:
1. The sort of Robert Kiyosaki method of buying assets with a focus on cash flow at first and then total returns after your expenses can be paid for.
2. The classic approach of total return investments and then as you get older more income focused.
3. The, "only have to get rich once," method of investing in low probability, high expected value investments/speculations. Potentially losing all your money several times. Or winning big quickly.
4. Index and chill.
From listener Nicholas:
Firstly, thanks for the presentation on AVXS you did a few weeks ago. After listening to your podcast, I managed to grab some around $212-213 and made a nice arbitrage profit from it.
Like you, I find this merger arbitrage investing to be a good way to work my cash while waiting for opportunities. I am not from the US and my previous experience on these merger arbitrage is in markets like Hong Kong, Singapore and Malaysia. The US seems to be a good hunting ground for these special situations but the rules and regulations may be different which is why your podcasts are a great help.
I have recently set up a system to search for these situations on the SEC website using certain keywords and found a couple of interesting ones. One of them is RMGN which is currently undergoing this exercise.
The summary on RMG's merger agreement can be found here
A company associated with its chairman is offering to buyout the company at $1.27 cash. At its current price of $1.18 and with the deal expected to be completed in Q2-2018, it represents a potential 7.6% gross upside with annualized return of more than 70%.
The value of the transactions is very small at just $16.8 mil so there s unlikely any regulatory scrutiny involved. The management is also supportive of the deal
The only concern is that the company is loss making and the price offered is lower than the previous traded price prior to the offer which may make the offer un-compelling. However, on the flip side, if the bid fails, at least the price would revert back to the pre-offer price which is actually higher than currently.
In terms of competition for the stock, as my capital is small, I have no issue with this.
I would appreciate it if you could share your thought process on this situation if you think it is or is not a good arbitrage.
I m also wondering if there is any difference in the privatization process between your recent case of AVXS vs RMGN. Will I also go through the same process of tendering my shares etc ?
Thanks so much.
From listener Stanley:
At the end of each or most of your podcasts you say something like "don't let the market take your money". Now that is nice to say but how to implement.
Some time ago your said you bought ADNT after some careful analysis. It has been pummeled of late but I take it you are still in.... you must have a loss.
I have TRIED and failed using an active STOP LOSS order. I am guessing that order is visible to others and all it takes is for 1 share to trade below the stop order price and my order executes possibly far below my stop price. Happened to me so I never use active stop loss orders.
Doing great analysis does not prevent "the market" from taking your money. Back to my question.... so how do you prevent the market from taking your money?
Let me just say, I have some pretty damn smart listeners and I appreciate them like you wouldn't believe!
Give the episode a listen to hear my responses.