Last updated: 2021-10-01

Launching Tickerverse: Event-Driven Investing Newsletter

How Buffet tracked corporate actions for uncorrelated returns?

Launching Tickerverse: Event-Driven Investing Newsletter

Corporate actions like CEO change, stock tenders, mergers, reorganizations, spin-offs, and more can dramatically impact the stock price of publicly traded companies. Buffet himself generated substantial uncorrelated returns using multiple event-driven investing strategies. In the 1965 letter, he shares his experience: "predictability coupled with a short holding period produces quite decent average annual rates of return after allowance for the occasional substantial loss.". Specifically, his returns in this category usually fell between 10% to 20%. He also explains that, while not without risk, this approach can bring uncorrelated returns: "In years of market decline it should usually pile up a big edge for us". He maintained up to 40% of the portfolio funds in this category. He even borrowed up to 25% of the partnership net worth for this purpose.

CEO Change

The CEO Change event is the first special situation that Tickerverse tracks. A new chief executive officer sees things with fresh eyes, shakes things up, and sets a new vision. In September 2019, biotech company Trillium Therapeutics Inc. was a beaten-down stock. The board appointed a new CEO , and two years later, in 2021, Pfizer bought the company for 59x the 2019 share price. This was when we realized how much alpha there is in screening for important actions within filings.

What kind of due diligence we do for a CEO Change event?

We like to consider the below questions when evaluating a new CEO event.

  1. How is the company doing?
  2. Why the CEO changed?
  3. Who is the new CEO?
  4. What is the new CEO's vision?

Click below to go to the latest Tickerverse events to look for potential stock price inflection points.

Tags: Service | Tickers: TRIL,PFE | Author: Vaclav Kosar