Each day watch the NYSE/NASDAQ gainer&loser list, you will always see some 20% jumpers. Probably, they are not some familiar names. Check out their fundamentals and you may wonder: Is this insane investment in the insane world?
Definitely not and most of them are driven by one category of events: M&A.
This is a buzz word in stock market. Lots of guys live on it, M&A betters, M&A hedge funds, etc. If such event does get triggered, party time then.
The goods of M&A are multi-fold. It's more fundamental prone so you are more sure about the trend of acquirer and acquiree. It keeps up for some time usually so you are better protective from plummet. It's less correlated so you are exposed to less systematic risk than most other portfolio strategies.
But that's not all of the story.
Like all chased-up stocks, you have to spot the peak and trend. Fundamental matters but psychological effect is also important. You may pay a high entry premium just to find nothing left. Also, the M&A may break down due to many factors. If it does happen, disaster then.
So I wish you to enjoy the party. But be smart and quick, don't be the bill payer.
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