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  • Writer's pictureIshfaaq Peerally


The markets open lower today as tensions between China and the US rises with the US official backing the Hong Kong protesters. Most stocks in our portfolio is in red today, especially our $OIL stocks $CXO and $PE as oil prices drop by 1.8%. Our largest position and arbitrage play, $AGN is keeping the portfolio from dropping much. That's why I like arbitrage.


The stock market $SPX500 is at all time high once again and it is hard to find good deals. My portfolio did well in November being up by 4.5% mainly pushed by GameStop $GME , Skyworks Solutions $SWKS . Apple $AAPL , JPMorgan Chase $JPM and Disney $DIS are all at ATH.

With stocks doing great, gold $GOLD prices have fallen to below $1500/oz and so has the stock price of gold miners. The first stock which I'm buying is Polymetal $POLY.L , one of the largest gold miner in Russia. In Russia, mining gold doesn't cost so much and Polyus(the largest Russian miner) has the lowest AISC(All in Sustaining Cost) in the industry. But if you look at Polymetal, their AISC is quite high and that's because they are investing in the future. Polymetal is building new mines and could be soon one of the largest gold miners in the world. I'm not investing for the next year, I'm investing for the long-term. Polymetal is also the third largest Silver $SILVER producer in the world and will soon enter the Palladium and Platinum $PLATINUM industries.

The second stock I'm buying in December is Fitbit $FIT . This is an arbitrage play. Fitbit will be acquired by Google $GOOG for $2.1 billion or $7.35/share in cash. If you look at the stock price today, it is less than this price with a spread of 8%. Therefore, there is the possibility of doing arbitrage. Fitbit makes smartwatches and because of poor business decision, they remained a niche product and failed to compete with Apple. Even Google failed to compete with Apple in hardware. We can say that there is a good fit between these two companies. It won't be hard for Google to make this acquisition and I don't see regulators opposing it. There is a high probability that this deal will go through and a high probability of making money by arbitrage. Let's hope Fitbit prices fall, so that we can increase our margins.

The third stock I'm buying is Allergan $AGN and this is another arbitrage play. This time it is a cash-stock transaction. Each share of Allergan will be converted to 0.866shares of AbbVie $ABBV and $120.30 in cash once the deal is done. The spread is 7%. It may not seem a lot, but the deal will close in the coming 3-6 months. However, the profits we can make can always increase if the stock price of AbbVie increases. On some of the trades, I already made 12% as the stock price of AbbVie has been increasing lately. Why don't I invest in AbbVie instead of Allegan? It is because of the risk. AbbVie has too much debt and rely on only one product. Allergan is a better investment at a better price. I do arbitrage instead of keeping cash and that's why I don't want to much risk and volatility with my arbitrage deals. AbbVie already issued $30 billions of bonds and the deal is likely to close soon.

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