One of my cycling buddies has opened an E*Trade account and has gotten interested in investing. A second cycling buddy works in the financial services industry and I myself am seriously interested in investing. So today was the first day of our little competition that’s going to last for the next 6 months. The basic rules are that we have $10k of paper money and can only be invested in up to 5 stocks and can only make trades once per month (but we can choose any time of the month). Person with the least money at the end buys beer and pizza for the guy with the most money.
So what type of strategy would one use in a volatile market in an economy that’s headed straight for some type of recession? I would love to adhere to a value investing strategy, but I feel that the time frame of the competition is too short. I also have decided to make a conscious effort to invest in the same manner as I would with real money. Thus, in this situation I have chosen to adhere to an risk-arbitrage strategy. I feel this gives me a lot of safety with a decent amount of upside. Right now I’m invested fully in four stocks that in my estimation will be acquired at their respective announced prices. The stocks are CVP, BUD, ABI, and ROH.
Given the fact that these acquisitions weren’t yanked during the awful month of October, I’m pretty confident that these acquisitions will take place. And if there’s any more market downside left in the near- to mid-term, I feel I will be better protected than my competitors. But judging from their own portfolios, they also seem to have made some good picks that bring safety and upside potential. It will be interesting to see how this plays out.
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