BUD Arbitrage Turns Out To Be Very Profitable

Well InBev announced today it has completed its takeover of Anheuser Busch and BUD stock stopped trading on the NYSE this morning.

Last month I suggested that there could be a good arbitrage opportunity by purchasing BUD stock with the stock down significantly compared to the agreed to purchase price. Turns out the deal closed even quicker than I guesstimated with about a 19% return on your investment within a month on buying Anheuser Busch stock at that time.

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Comments (18)


Haha! Congratulations!

I remember how obscenely disrespectful some commenters were when you initially put forth the idea, saying you didn't know what you were doing.

Always better to be right and "dumb" (or so these people said) then wrong and smart.

Congratulations again!

And yet this doesn't even offset the losses from USG that have piled up since the posting of his last investment report...

2million STILL wouldn't be able to tell you why this deal makes sense from anything but a hunch, so I'm calling luck here.

Looking across his portfolio, I see far more red than black, so this is one more data point that novices occasionally pick a winner but miss far more often.


Why complain when 2million was right on the BUD call? We’re all here to learn and make some $$$. Chill out…

I'm just going to say, "Good call". I think that it was a very good call. You don't become a "guru" overnight. Not to downplay your reasoning, but a shot in the dark is better than sitting in the corner.

Caleb (Blueprint Economics)

concerned, since you seem to have all the answers, why don't you tell us all what you're doing with your money these days? Since according to an earlier comment your income is low enough that you can still contribute to a Roth IRA, I'm curious as to what your "expert" advice may be.

concerned:

sometimes, wouldn't you agree that it is better to be lucky than to be right?

how about sharing your portfolio? let's do some critiquing!

2mill:

good call - this deal got finalized before i had time to do my due diligence. :-( oh well ...

also, maybe i would tend to agree with concerned, but for a few reasons:

- my stock picking is probably as bad or worse than yours
- it is your blog, and you have never claimed that you are a stock market guru
- you alone know your investing mindset and what kind of risk you are willing to take

- s.b.

And who DOESN'T have more red than black? The stock market just dropped below 8,000 for the first time in 5 years and you talk as though people should have hardly any losses? Even Warren Buffet is facing losses, but he's not panicking.

During a bad market, the best investors keep their eyes open for good deals. Last time I checked, a smart investor isn't investing in stocks to try to turn a profit in the next 3 months or even 3 years, since prices can be volitile in even the best market, but is investing for a long term profit. Many of the companies that are down sharply today in this recession will fail, but far more will survive, slim down and come out of the recession stronger. But you won't know for sure which of the much cheaper stocks available today are good investments, and which ones are duds, until after it happens and it is too late to get a share of the profit when they come back.

Frankly I believe this was one of the easier wins to spot, since InBev had the cash but was facing a dificult beverage market in Europe. Their sales were declining because Europeans are cutting back on purchases. InBev needed this deal more than BUD, to prop up their stock price, and they paid a nice premium to get it. 2 Million's "hunch" had quite a bit of evidence to support it, if someone did some research.

Smart... only if he bought it.

1. My wife doesn't work, and we file separate tax returns. I gift her maximum allowable gift $$ the first week in January and she invests the money into a Roth IRA in her E*trade account. I make too much to contribute anything to my own Roth, but it works out nicely for us the way we've arranged it.

2. I don't have all the investment answers. However, the rides I've taken in SKF, DUG, and QID have all been far better than any individual equity I've traded in the last 6 months. I have been enjoying taking straddles in GOOG 400 Mar 09 contracts. Been short GS ever since Bear Stearns collapsed, but missed Lehman. Just went long AAV and a couple other CANROY's because of the excellent distributions and the potential for an energy turnaround this winter. Lastly, I've been accumulating physical gold for the last 2 months with most coming post-bailout. Dollar is a PoS and will lose favor with the rest of the world within the next 4 years.

If you follow Peter Schiff, he has some good explanations about why physical gold is great long term. I'm not as bullish as he is, but you can't beat the prospects.

Looking at BQI, PBG.TO, AUY, DNDN, and SGEN for highly speculative companies that could breakout.

Is that enough insight into my current / developing strategies?

If you are concerned, my _ _ _ _ is bigger than yours. Only if you're concerned. If you're not concerned, then never mind.

Peter Schiff is today what Henry Blodget was 10 years ago.

aa:

smart if only who bought what?

concerned:

that was helpful, though i'd be curious at what price you got into aav.

right now, i doubt if anyone would have the cash or the courage to go into anything "highly speculative."

- s.b.

Good point by AA about whether 2Million actually bought BUD stock. Did you 2Million?

Thanks,

David

I agree regarding the price of houses. With all the choas and foreclosures - you would think the banks would willing to come down on the prices. And regarding buying from another home owner or developer - no one seems to want to really sale. I am not looking to be unreasonable but I am not buying high in this market.

concerned :

Oh my good... You're the one ranting about being lucky when your best trades are in SKF, DUG and QID?? I held SKF for a while and even I know looking back that this could have gone bad. SKF is down 50% today. But I'm sure you foresaw that as well.

All the crap you spout about Gold & banks only tells me you're a very diligent internet blog reader - and completely unable to come up with your own ideas.

I still can't believe you're trying to give 2million lessons about taking undue risk when you've just admitted making your best trades from a 2X ETF that went down 50% in one day. Ah the irony...

2million:

Please, please don't get sidetracked by some of the posters who'll make you believe you can double your money by trading some 2x ETFs or by not sticking to your own plan. You're way ahead most of them already, just stick to what you're doing now.

Most of these commenters will be long gone once you reach your personal goal either way, so you don't have to live up to "their" expectations.

aa / David -
I did own 106 shares of BUD, but I did not purchase any additional shares when I posted this.

Muzie - I'm not currently in ANY leveraged ETF's...I was merely stating that I've ridden them to quality gains for nice profit earlier in the year. I was nowhere near the top when SKF peaked over 200. Only 2 positions: AAV and GOOG straddles.

The beauty about trading is getting in and out of your positions when things are going your way, NOT holding. Look back on other posts I've made over the last 6 months regarding the "buy and hold" strategy.

Why don't you go back to his posts about Wachovia and read my analysis WELL before they started on the cataclysmic spiral.

I'm not an avid blog reader, and I'm insulted you liken me to someone that uses those sources to make decisions.

As someone who has achieved his net worth goals, I'm only interested to see what happens with the guy that runs this blog...I wish him all the best.

And btw, I'll be here if/when 2million EVER achieves his net worth goals.

I was buying at $45 a share.

Now I just put all that money into USG at around 8-10 a share. USG is still a good buy. Also, look at IR.

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A personal finance weblog of my journey to reach my goal of $2 million + the value of my primary residence.
Current Net Worth: $1,574,185

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