Thursday, October 28, 2010

Opportunistic Investing

Morningstar Opportunistic Investor
Morningstar Investment Research

Michael Tian Editor, Morningstar Opportunistic Investor

I recently gave our readers a chance to make $200 in 5 minutes on a simple, above-board investment.

Sure, $200 isn’t a lot of money. But this “chump change” opportunity is the kind that could be a real game changer for you, with a multiplier effect that ripples through your entire portfolio (details soon). But first, here’s something else you’ll definitely want to act on:

The Morningstar Opportunistic Investor Guide to the Most and Least Promising Stocks. Get it now: free download »

True opportunity rarely screams. It whispers. Hearing it requires a trained ear, especially with so much false chatter clogging the marketplace. At Opportunistic Investor, we know how to listen. And we quietly pass along what we learn.

The Perils of the “Big Opportunity”

Perhaps nothing epitomizes the opportunity of a big payoff as much as the classic IPO. In the late 1990s IPOs jumped hundreds of percent in a single day, and everyone had an uncle or friend who got in on a Yahoo (YHOO) or an Ebay (EBAY) and retired early. But bigger is not better, unless you’re a big enough insider to secure significant allocations at the offer price. For most of us, the IPO rule of thumb is simple: stay away. Because they underperform. Massively.

You won’t find Opportunistic Investor joining the clamoring rush for every “hot” IPO that comes down the pike. But we have selected a richly rewarding few. Not because of all the shouting, but in spite of it. How? By investing if and only if we find an IPO that meets our strict criteria. Criteria that require listening a little more closely, and looking a lot more deeply.

We’re happy to share exactly what we look for in our free Investor Stock Guide. Click here for your free download.

Maximize the Opportunities Most Miss

What makes somebody an opportunistic investor?

The gumption to do what it takes to find the investment opportunities most people walk right by. We’re talking research. Nitty-gritty, nuts-and-bolts, roll-up-your-sleeves, open-the-books, run-the-numbers digging. It takes time. It takes know-how. It takes real dedication. But it’s the only way to get past the chatter to the straight story.

Sound daunting? Sure. But there’s good news. Opportunistic Investor does the legwork for you.

$200 in 5 Minutes

Ready to learn more about the extraordinary opportunity I shared with our readers recently? Here’s how it worked.

Credit Acceptance Corp (CACC), a boutique financial company specializing in lower credit quality auto loans, announced a tender offer for 4 million of its shares at $50 per share. Despite the $50 offer on the table, though, the stock was trading for only $47.50.

The reason? A massive over-subscription to the tender that caused the company to pro rate its initial offering--for fairness’ sake the company would buy only 10% of the shares each person wanted to tender and return the remaining 90% to the shareholder. That effectively knocked out profit-skimming by big arbitrageurs--the last thing they want is to be stuck with a ton of shares they can't sell--while opening up a loophole for small investors.

In most tender offers (which was also true here), if you hold an "odd lot" of stock--that is, less than 100 shares--the pro rating does not apply to you. As long as the tender offer was not withdrawn, you’d be cashed out at $50 per share.

So the trade was simple: Buy 99 shares of stock, tender them as soon as possible by calling your broker, make roughly $250 ( ($50 - $47.50) x 99). After broker fees, you’d have earned $200 for 5 minutes of work. That’s one advantages of being a small investor. You’re free to benefit from small inefficiencies in the market that large fish wouldn't bother with. Provided of course, that you can find those opportunities to begin with.

Opportunities, Action, Results

Opportunistic Investor does more than sound out uniquely rewarding investment opportunities you wouldn’t hear of anywhere else. We invest in them ourselves.

There’s no need to take our word for anything. You can see for yourself how our ideas pan out. We put them to work in a six-figure, real-money portfolio: Opportunistic Investor's Mosaic Portfolio. It’s actively adjusted to profit from new opportunities and maintain the best possible risk-reward ratio.

You’re welcome to invest, and reward yourself, right along with us.

Start finding your own rewarding opportunities today with our special report: The Morningstar Opportunistic Investor Guide to the Most and Least Promising Stocks. Download it now free »

Enjoy the guide and keep your ears open, your next great investment opportunity could be right around the corner.


Michael Tian

Editor, Morningstar Opportunistic Investor

P.S. Free is a pretty tough price to beat: Try Opportunistic Investor at no cost and no obligation with our free 14-day trial. If you don’t gain insights that add real value to your investing during that time, simply cancel and owe us nothing.
Click here for your free, 14-day trial.