Updated Performance and Transactions

I sat down today and updated my performance and transactions spreadsheet (check out the right sidebar). It is pretty interesting how quickly the market has changed over the last month. With the S&P only up 1.71% this year, I am pretty happy with my current year-to-date performance.

Many of my readers can attest to my recent personal finance binge and the lack of investment posts. That currently does not mean I have stopped trading! I thought I would detail some of the transactions have I been negotiating in an effort to shield myself from this volatile market.

Deal Arbitrage:

I presented several opportunities mergers and acquisitions offer to investors last month. Some privatization deals are particular lucrative to small investors, such as the MCBF trade. While there are certainly some risks with these trades, deal break-offs and shareholder disapproval, statistically, these trades are pretty sure investments. If you are looking for stable returns in-excess of fixed income investments, these deals are a good place to start.

Aggressive Hedging:

I may do a more formal write-up detailing what hedging means, but for now I will simply explain the strategy individuals can implement in this uncertain market. The idea is simple, purchase a stock you feel is going to simply outperform the broader index, maybe it is undervalued or showing great technicals, and short the index that closely follows that stock. If the broader market goes down, your long position in your stock may fall, but your short position in your index will net positive returns. The reverse strategy can be implemented as well.

In short, risk-adverse investors should look for sure-things in this market environment. In order to appropriate protect yourself from this variable market, I would suggest taking both short and long positions. Good luck and happy trading!

Arbitrage Trade

Oh, the privileges of being a small investor. It is really nice that big hedge funds are too occupied with million dollar arbitrage and currency trades to capture all available arbitrage. A couple thousand is insignificant in their books, but for many small investors, a trade of that proportion could add 10% to their net worth! As my risk tolerance diminishes, I continue to look for opportunities that provide substantial returns with limited risk. One such opportunity is Monarch Community Bancorp (MCBF).

Background:

Monarch Community Bancorp specializes in... oh wait a minute... it doesn't matter what they specialize in, what matters is what they are doing with their stock. In February MCBF agreed to execute a merger transaction in an attempt to reduce their number of shareholders in order to become a private company. MCBF calculated that in order to reduce the number of individual shareholders to 300, the maximum number of shareholders of a private firm, the company would need buy out shares from investors with less than 1,000 shares, at a price of 13.50 per share. The deal is scheduled to close sometime in the fourth quarter of this year.

Required Transactions:

The trade is pretty simple for this arbitrage opportunity: go long, right now, at any quantity under 1,000 shares.

Expected Results & Risks:

The only risk involved with this trade is merger abandonment. I have no reason to believe that the deal will fall through based on my initial research on the transaction. It appears that the company is progressing nicely toward privatization. So if the deal does finalize, investors could easily snatch up almost 10% in four months!

*Disclaimer*
The writer of this article currently owns shares in Monarch Community Bancorp. Investors should always do their own individual research before executing a trade.

Links for Friday

This Weeks Links:

• The Motley Fool presents a great deal arbitrage opportunity. The hedge fund has already implemented this strategy.
• Smart Money adds to ConsumerReports list suggesting when to buy certain items.

A Post from the Past:

• Consult May's Some Thoughts for Students Entering the Job Market when considering a potential career. The post helps readers calculate their true hourly wage as well as their relative salary value based on work location.