Is merger news on weekend an opportunity for timing market?

Boho said:
Kraft withdraws $143-billion offer to merge with Unilever We could place an order now for execution first thing (kind of) Tuesday. Is there a good chance to profit from this news?
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Absolutely! You are sure to profit or lose on such a move .... but which will it be ? Therein lies the challenge with market timing.

You may remember recent discussions just before the elections. Many were certain who would win the election ...... oops. Of course when the results were in, many knew the market would drop ...... double oops. So many financial bets on those two relatively "sure bets" would have lost money. It's just a reminder to really think about the risks in market timing before going down that road. Make sure you are comfortable with the results if you are wrong.
 
Boho said:
Kraft withdraws $143-billion offer to merge with Unilever

We could place an order now for execution first thing (kind of) Tuesday. Is there a good chance to profit from this news?
Click to expand...
Depends; are you investing, or gambling?

If you are investing, it's unwise to try to time the market because it seems to me that "the big guys" have more inside information than the average investor, and also will beat you to the punch.

Bear in mind, that like many of our members here I am a retired buy-and-hold index investor for the most part. I am doing pretty well and don't feel the need to push my luck. In other words, if it was me I wouldn't touch this "opportunity" with a ten foot pole.

Others may have other approaches, especially those who are not retired yet.
 
Smart money has already made the play, or hedged away. The average investor never profits, actually we're the dumb money that comes late to the party. Been there, lost my t-shirt and some money.
 
The best way to profit from the news might be to place an order for a big load of Kraft Mac & Cheese. If you can't unload it for a gain you can always eat it...for a gain. :)
 
Weekends are a little different though. What's the trade to make if you're going to make one?

(and I don't mean an index fund)
 
Heard of after hours trading? Probably not, huh. All the money to be made is gone long before the open. BUT, you can still lose money if you want.
 
COcheesehead said:
Heard of after hours trading? Probably not, huh. All the money to be made is gone long before the open. BUT, you can still lose money if you want.
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I have, actually. But the little guy who doesn't do after market trading responds to this news anyway. The difference with weekend news is that I know I won't be later than any of the little guys.
 
Boho, I have to tell you that I thoroughly enjoy reading your posts. Even if you're not a troll, they provide great amusement.

Keep 'em coming!
 
braumeister said:
Boho, I have to tell you that I thoroughly enjoy reading your posts. Even if you're not a troll, they provide great amusement.

Keep 'em coming!
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Good. Then let's play a game. Take your best guess at how to play the market to benefit from this, short term. I think people are actually afraid of being correct with this because that would mean their general strategy is wrong.

BTW, I've seen reports of the market responding for hours after an announcement like this.
 
Boho said:
I have, actually. But the little guy who doesn't do after market trading responds to this news anyway. The difference with weekend news is that I know I won't be later than any of the little guys.
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The big guys got there first. Cramer's best advice I ever heard was "never trade the open."
 
Boho said:
I have, actually. But the little guy who doesn't do after market trading responds to this news anyway. The difference with weekend news is that I know I won't be later than any of the little guys.
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Boho as a little guy I've lost a bunch of money prior to and after the close! So yes, you too can participate in the madness. The folks who you are trying to get ahead of certainly will.

Please play with paper or very small trades as you insist on learning this lesson.
 
My guess is the average investor will think back on the mergers of AOL and Time Warner and figure Kraft is too smart to buy something that they really shouldn't. But Kraft knows the average investor will consider this and come out with news on Tuesday that they're wanting to focus on the growth of their own brand. But the average investor will know that Kraft knows what they know, and will figure Kraft is trying to deceive. But Kraft knows what the average investor knows and so will counter with potential new markets. But the investor knows that Kraft knows what they know Kraft thinks they know, so the investor clearly can't sell right now! And since the average investor knows they can't win against the market, clearly they can't buy right now!

You can't fall victim to one of the classic blunders. The most famous is never get involved in a land war in Asia, but only slightly less well known is this: never go in against a corporation when money is on the line!
 
This is what I get for asking...

OK, so now you have to hear my theory. Whatever the price was before talk of the merger, it will go back to that price next week. Whatever the price is on Tuesday afternoon, it won't change too quickly from that, so if it's higher on Tuesday afternoon than before the merger talk, I'd bet it will fall and vice versa. And If I'm wrong it's your fault because you won't help.
 
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samclem said:
You are getting more help than you realize. It doesn't appear you are hearing any of it.
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+1

Let me give you some more help, that will help you to earn even MORE money than what you propose, with a higher probability.

Take your money, go to the casino, and put it all on red. In my opinion you are more likely to win, and win big, than by doing what you propose.
 
As I wrote elsewhere, I think successful market timing is not about winning big, but winning small extra amounts several times over the course of year without risking so much as to trail one's benchmarks.

I don't see a play in this Kraft news. I was trying to put myself in the shoes of the CEO and his cronies to figure out why they wanted to do a merger anyways. I think it is mostly about egos. Please read the book Decisive by Heath & Heath for more fun. Then add Kahneman's Thinking, Fast & Slow. Start thinking Slow.
 
I suggest you start a new thread called "Boho's Day Trading" and keep us posted for the next year or so. Who knows? Maybe you will win a few converts!
 
I have some UL shares. I got these in late 2008, never traded them as I keep them as one of the dividend payers. Don't look at them much even. I have got a good gain on these, buying really low, but they have not been hot lately.

On Friday, it jumped 14%. So, that caught my attention, and I had to find out what happened. Good earning reports don't do this to a company like this (they cannot have surprises like biotechs or technology companies). The price at close was $48.53, still less than the $50 buyout offer. So, apparently investors were not sure that the deal would go through.

Now that the offer is canceled, the price will certainly drop back down. Oh well.

What is interesting is that shares of Kraft also jumped 11% on the news of the attempted takeover. Apparently, the failed merger was taken as a would-be good synergy.
 
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Hermit said:
I suggest you start a new thread called "Boho's Day Trading" and keep us posted for the next year or so. Who knows? Maybe you will win a few converts!
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I thought about it for a second. Nah.

But in addition to my above prediction, I say buy MRC Tuesday morning. Let's say 9:31 am. It will go up by mid year, and probably by the end of the week. I'm not buying because I'm mad about seeing it as a holding of PXSCX which is on this list of socially conscious funds, and there's nothing socially conscious about it. But it went down on Friday based on bad last-quarter report with a good outlook and I think it's too low.
 
samclem said:
You are getting more help than you realize. It doesn't appear you are hearing any of it.
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There are some things that some people can only learn for themselves.

I've tried to teach my kids - a smart person learns from their mistakes, a wise person learns from the mistakes of others.

-ERD50
 
Merger momentum and investor sentiment: the stock market reaction to merger announcements
bidder stock prices are more likely to increase when a merger is announced if recent mergers by other firms have been received well (a “hot” merger market) or if the overall stock market is doing better. However, there is long run reversal. Long-run bidder stock returns are lower for mergers announced when the either merger or stock markets were hot at the time of the merger than for those announced at other times.
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Note the term "long run". Computer trading speed isn't a factor with a long run reversal. Maybe not relevant with the canceled merger we're talking about but I think this shows you don't need to be a computer to predict the market.
 
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More support for market timing with mergers.

Evaluating Companies for Mergers and Acquisitions
It has been investigated that, in general, cross-border acquisitions are related with a significantly positive "announcement effect" on the acquirer's share value, and subsequently by a partial reversal of these gains in the long term
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Emphasis mine. Once again, a regular investor can take advantage of this long-term trend.
 
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