Give a man a fish and you will feed him for a day. Teach a man to arbitrage and you will feed him forever.
- Warren Buffett
One of the great secrets of Warren Buffett's investment success has been his arbitrage and special situations investment.
With the advance of the Internet, brokerages started offering online trading at deep discounts from their full-service retail rates. With the lower rates the world of stock arbitrage and other special situations are opened up to the masses. Sitting alone with a computer and an online brokerage account with deeply discounted trading rates, an individual investor could compete in the field of arbitrage with even the most powerful of Wall Street firms.
Warren Buffett is probably the greatest player in the arbitrage and special situations game today. Not because he takes the biggest risks. Just the opposite - because he learned how to identify the bet with the least risk, which has enabled him to take very large positions, and produce results that can only be described as spectacular.
It was Warren's arbitrage investments that took a great investor and turned him into a worldwide phenomenon. Professors Gerald Martin and John Puthenpurackal's study of Berkshire Hathaway's stock portfolio's performance from 1980 to 2003, they discovered that the portfolio's 261 investments had an average annualized rate of return of 39.3%. Even more amazing was that out of those 261 investments, 59 of them (22.7%) were identified as arbitrage deals. And those 59 arbitrage deals produced an average annualised rate of return of 81.28%.
In 1987, Forbes magazine noted that Warren's arbitrage activities earned an amazing 90% that year, while the S&P 500 delivered a miserable 5%. Arbitrage is Warren's secret for producing great results when the rest of the stock market is having a down year.
With Warren's incredible arbitrage performance in mind, and the knowledge that the average investor now has access to institutional brokerage rates, it was high time that you took a serious look at the arbitrage and special situation investment strategies and techniques that produce Warren's mind-numbing results.
You must explore how he find the deals, evaluates them, and makes sure that they are winners. You will dwell into the mathematical equations and intellectual formulas that he uses to determine the probability of the deal being a success. In Warren's world, certainty of the deal being completed is everything. It is how the high probability of the event happening that creates the rare situation in which Warren is willing to use leverage to help boost his performance in these investments to unheard-of-numbers.
- Warren Buffett
One of the great secrets of Warren Buffett's investment success has been his arbitrage and special situations investment.
With the advance of the Internet, brokerages started offering online trading at deep discounts from their full-service retail rates. With the lower rates the world of stock arbitrage and other special situations are opened up to the masses. Sitting alone with a computer and an online brokerage account with deeply discounted trading rates, an individual investor could compete in the field of arbitrage with even the most powerful of Wall Street firms.
Warren Buffett is probably the greatest player in the arbitrage and special situations game today. Not because he takes the biggest risks. Just the opposite - because he learned how to identify the bet with the least risk, which has enabled him to take very large positions, and produce results that can only be described as spectacular.
It was Warren's arbitrage investments that took a great investor and turned him into a worldwide phenomenon. Professors Gerald Martin and John Puthenpurackal's study of Berkshire Hathaway's stock portfolio's performance from 1980 to 2003, they discovered that the portfolio's 261 investments had an average annualized rate of return of 39.3%. Even more amazing was that out of those 261 investments, 59 of them (22.7%) were identified as arbitrage deals. And those 59 arbitrage deals produced an average annualised rate of return of 81.28%.
In 1987, Forbes magazine noted that Warren's arbitrage activities earned an amazing 90% that year, while the S&P 500 delivered a miserable 5%. Arbitrage is Warren's secret for producing great results when the rest of the stock market is having a down year.
With Warren's incredible arbitrage performance in mind, and the knowledge that the average investor now has access to institutional brokerage rates, it was high time that you took a serious look at the arbitrage and special situation investment strategies and techniques that produce Warren's mind-numbing results.
You must explore how he find the deals, evaluates them, and makes sure that they are winners. You will dwell into the mathematical equations and intellectual formulas that he uses to determine the probability of the deal being a success. In Warren's world, certainty of the deal being completed is everything. It is how the high probability of the event happening that creates the rare situation in which Warren is willing to use leverage to help boost his performance in these investments to unheard-of-numbers.
1 comment:
A great deal has been made of the fact that Sokol might take over as head of Berkshire one day. He was one of a list of “Buffett replacements” that the press identifies from time to time.
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