In and Out Workout and a Break

By Joe Ponzio on March 25, 2008  |  10 comments

I jumped in CCU last week and got out on Thursday (with a 6.5% gain) because I didn't like the bickering and I didn't want to get slammed over the long weekend. When the companies and/or banks fight, investors usually lose. Considering that there are enough workouts out there, I'm walking away from this for now.

On a personal note: I just found out (yesterday) that I am the victim of identity theft. I'm taking a break here for a bit (days, maybe a week or two) to get this straightened out with the police and my attorneys. During that time, I'll be answering comments, but don't look for any new posts.

Fun, no?

Pre-Regulatory Workouts

By Joe Ponzio on February 26, 2008  |  10 comments

I don't want to focus this blog solely on workout situations; still, I think a majority of visitors never even dreamed of finding workouts until we walked through the various steps, the timeline, and the potential profits and risks. So, let's add another chapter to the workouts/arbitrage discussion. Question: Should you consider buying workouts before regulatory approval goes through — when the potential profits are greater?

Penn National Gaming — Workout or Worthless?

By Joe Ponzio on February 15, 2008  |  14 comments

There had been a considerable amount of discussion about the acquisition of Penn National Gaming, both in these comments and in a few other comments around the site. As the deal stands right now, Wall Street appears to be leaving $18 a share — or 38% — on the table for today's workout investors.

What will upset the applecart?

Sold My RTSX; Workout Timeline

By Joe Ponzio on February 11, 2008  |  23 comments

I just finished going on a comment-spree and I thought I should update you on a few other things as well. First, I sold my RTSX today. When engaging in workouts (as with any other investment), I am looking for both safety of principal and a satisfactory return (thanks, Ben Graham, for the definition of an investment).

As you know, I may use leverage on my workout positions or as an offset if I need to buy a business and I am fully invested. The danger in using leverage is that you can quickly rack up the losses. Here's why I sold:

Workouts Work Out In Down Markets - Part 4

By Joe Ponzio on January 25, 2008  |  11 comments

There have been a lot of great questions regarding workouts over the past week of the Workouts Work Out In Down Markets series (beginning here). Some visitors jumped into the comments and posted free resources to track upcoming mergers, acquisitions, and going private transactions.

We all have that looming question in the back of our heads: Can I really make low-risk money when all these smart people are seeing the same deals and passing?

Workouts Work Out In Down Markets - Part 3

By Joe Ponzio on January 21, 2008  |  15 comments

In Part 1, we looked at the various steps involved in a merger, acquisition, or going private transaction. As the transaction progresses along those steps, the spread between the market price and the closing price tends to close as the transaction becomes more finalized and less risky. In Part 2, we looked at a few deals and analyzed the risk vs. reward as well as the need to really dig in to the SEC filings.

Workouts are meant to be virtually "risk-less" transactions for idle cash in your portfolio. Let's dive in with that in mind.

Workouts Work Out In Down Markets - Part 2

By Joe Ponzio on January 18, 2008  |  9 comments

So, you're sold on using arbitrage to enhance your portfolio. In fact, you've always known that arbitrage can offer virtually risk-free profits; still, it can be somewhat scary to jump in with both feet. Rather than getting into the theoretical aspects of arbitrage, let's take a look at some real life examples of when you can have a high degree of confidence...and when you should be leery.

Workouts Work Out In Down Markets - Part 1

By Joe Ponzio on January 16, 2008  |  13 comments

If you"ve read Mohnish Pabrai's The Dhandho Investor, you"ll likely recall a chapter entitled "Use Arbitrage!" If you"ve been following F Wall Street for a while, you"ll remember (and possibly have made money on) Use Arbitrage! The Tribune Company Example. Why do we say you should use arbitrage? In fact, what is arbitrage and is it a strategy for the faint of heart?

Well, in a down market, it is one of the few strategies that can save your portfolio...and your nerves.

Just Sold Tribune

By Joe Ponzio on December 20, 2007  |  11 comments

At $33.67, there is almost no upside and big potential downside if the deal falls apart last second. Just wanted to let you know that I sold TRB. Remember Buffett's rule: Don't lose money. There is very little risk left, but the few pennies on the upside do not justify the many dollars on the downside.

Just thought you'd like to know my thoughts.

Don't PUT Yourself In A Position To Lose

By Joe Ponzio on December 12, 2007  |  9 comments

Last month I discussed selling options against positions when the markets are high and everyone is happy. The markets can do anything on a minute by minute basis; still, they tend to stay within certain ranges from month to month — even if those ranges are hard to predict. As with all investing, you need to estimate the odds of a certain event happening and invest your portfolio accordingly.

As a general rule of thumb, I expect the markets to drop swiftly and climb slowly. That's precisely why I don't like selling puts against my positions.

Use Arbitrage! The Tribune Company Example

By Joe Ponzio on December 4, 2007  |  27 comments

Late last week, the FCC approved Tribune Company to own print and broadcast media in the same market. Why was this important? Tribune Company (TRB) is going private and the FCC approval was critical to this transaction. Without FCC approval, the deal might not have gone through. With that hurdle out of the way, what's to stop it now?

And how can we make money from it?

Don't Go Short On Overpriced Companies!

By Joe Ponzio on November 15, 2007  |  4 comments

When you sell stock short, you are essentially selling the stock today with the hopes of buying it back at a later date — and a lower price. We know that price follows value; still, management can do a lot to mess with the company's stock price and screw up your short position.

On a short position, your potential gains are fixed and your opportunity for loss is variable. Not a good way to make money. Let's look at a play that could go very bad.

When People Are Happy, Protect Your Portfolio

By Joe Ponzio on November 12, 2007  |  15 comments

Last week was a wild one for stock prices. The Dow lost 4.1% (threatening 13,000); the S&P 500 was down 3.7%; the NASDAQ lost 6.5%. It was crazy enough to make most investors quake in their boots.

I don't try to predict the direction of the markets on a daily basis; still, I hate to lose money. That's precisely why I like to sell options from time to time.