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  • Writer's pictureIshfaaq Peerally


The first half of 2020 was chaotic with the kangaroo market. The S&P 500 $SPX500 went into a bear market, crashing by 35% and already got out of it. The S&P 500 is down by 4.84% YTD. As for my portfolio, we are beating the market as we are down by only 0.42%, avoiding the bear market.

The second half of 2020 is going to be chaotic as well with the pandemic, recession and presidential elections.

The first stock which I'm buying in July 2020 is a Copper miner, Freeport-McMoRan $FCX . Investing in a copper miner means betting on higher copper prices. The demand for Copper is going to increase in the coming years with 5G, IOT, electric vehicles and renewable energies. All these technologies require a lot of Copper as copper is the second best electrical conductor after Silver. Even in the developing world, the demand for Copper is increasing with higher construction and electrification. The supply for Copper is not increasing that fast and there is the possibility of a supply gap. Another good reason to be bullish on copper is if we have higher inflation.

Why did I choose Freeport Mcmoran? It is because it is a bad copper miner. They have one of the highest operating costs in the industry but this makes the stock very sensitive to copper prices. If you're bettin on higher copper prices, for the long-term, the risk is worth it at current prices. The fundamentals of the company are good with most of their debts due only after 2025.

The second stock which I'm buying in July 2020 is Tiffany & Co. $TIF . Tiffany's is the king of intangible assets. Tiffany & Co. is going to be acquired by LVMH for $16.2 billion in cash of $135/share. I'm investing in Tiffany's as part of an arbitrage deal. But there were rumors that the deal will not go through as board members of LVMH are unhappy about the pandemic and unrests in the US. These rumors are unfounded in my opinion as 47% of the company is owned by the second richest man in the world, Bernard Arnault and he has 63% of voting rights in the company. You cannot become the second richest man in the world by thinking about the short term. Bernard Arnault build his portfolio over the long-term and acquiring Tiffany & Co. will be a good deal for him.

Arbitrage is always a good alternative to cash in times like this. Stocks are expensive and cash is trash. The third stock which I'm buying in July 2020 is another arbitrage deal, Fitbit $FIT . Fitbit will be acquired by Google $GOOG in a cash transaction for $2.1 billion or $7.35/share. Right now the spread is big. Some people are worried about the deal as regulators are not very happy with the big tech. This is real risk. But I still believe that the deal will go through.

Arbitrage is risky if the deal doesn't go though you can lose a lot of money but it gives you stability. And only in rare occasions will a deal fail. If you think about it, it is like any other investment. You can invest in a company and something bad happens and it crashes. Arbitrage is less risky than that.

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