One of my favourite kind of opportunities is one with a limited downside. In early March Outdoor Channel received an all cash takeover bid which topped an existing offer, and coming from a cash rich company. A bidding war looked very likely so I announced on my blog that I was going long.
I bought it at a few cents over the offer price, this was a great opportunity to take full advantage of any greater offers, whilst the downside was protected and at most I would lose on dealing costs. I considered it very unlikely the takeover would fall through.
I was correct, and a bidding war commenced. Although the upside was small (nothing compared to the 70% I had made on my Supergroup (LSE:SGP) investment), it was well worth it considering the protected downside.
After fees I made 12.3% on my investment in just over 2 months. That is an annualised return of 70% and I’m pleased with the outcome. It’s just unfortunate these opportunities don’t come along more often.If you found this post useful, please subscribe to receive new posts for free by email.
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