Thursday, July 03, 2008

Getty Done, Choicepoint Next

Getty Images (Ticker: GYI) finally closed yesterday so I made a nice little return on this arb play. I started building the position on 5/19 and continued adding to it until the week of the closing. My average cost basis was $33.39, which equates to a net return of 1.83% or 14.81% if you annualize it. I used leverage in this arb play to maximize my return.

My next arb play is Choicepoint Inc (Ticker: CPS), which is being acquired by Reed Elsevier for $50 per share. I started building a position today. This deal was announced in February, but is being held up by an antitrust investigation. I see very little risk in them blocking this deal. I’m not concerned with any financing concerns since this is not funded by private equity money.

As I’ve said, you have to be careful with the arb plays because it’s a mine field out there. Today, Penn National Gaming (Ticker: PENN), which I was considering, fell apart. You have to be patient and not get too greedy in the arb game. I have to admit that I got carried away with Getty Images and built up a position that was way too big. I would have been vaporized if the deal fell apart.


At July 04, 2008, Anonymous Anonymous said...

Thanks for the Getty tip. I held this for about 5 weeks. Almost painless. Keep'em comming.


At July 09, 2008, Blogger Money Turtle said...

Look for deals announced after this financial mess. Private equity are putting a lot more of their own equity into the deals, which should satisfy the financing terms from the banks. You just have to be patient with these deals. It’s a nice feeling when the deal finally closes. Good Luck...


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