We are in a bear market, but stocks, in general, are still expensive, with the CAPE ratio of the S&P 500 $SPX500 at 30. We cannot stay in cash, or else we will miss opportunities if the market recovers, and we cannot go all in either.
The alternative is special situation stocks.
The first stock I'm buying in March 2023 is iRobot $IRBT which will be acquired by Amazon $AMZN in an all-cash transaction. There is the possibility of making money by arbitrage with a spread of over 30%.
The second stock I'm buying in March 2023 is another arbitrage opportunity, TEGNA $TGNA, which will be acquired by a hedge fund, Standard General, in an all-cash deal. Here the spread is about 40%. The stock crashed last week after the FCC requested a hearing.
When it comes to risk arbitrage, it is very important to consider the worst-case scenario, where the deals fail, and know what to do in case the deal doesn't go through.
The third stock I'm buying in March 2023 is Icahn Enterprises $IEP . It is mostly for its high dividend yield.