|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
To a man with a hammer... mea culpa EBIX
Posted by: whopper investments (IP Logged)
Date: June 20, 2013 07:04AM
One of the great things about writing a blog is the acclaim. That sounds weird, but it’s true- it’s great when you get something like OUTD right and 50 people message you or comment and call you a genius. But every investor makes mistakes, and I’m writing this post to own up to one of them: I messed up investing in the EBIX arbitrage.
Long story short, I didn’t buy the short case, and I thought a higher bid was coming. But it looks like the short case had some merit, as Goldman is walking away from their bid and not paying a break up fee.
In hindsight, a few things went wrong here
1) Flat out, I was too full of myself. I was riding high off a series of successful investments (OUTD, LAKE, IFT just a few examples) and thought I could do no wrong. I thought EBIX was cheap at $20, and I thought companies would be coming out of the woodwork to buy it and the shorts were crazy to think otherwise.
2) I was greedy. Coming off the great OUTD investment, I was looking for another. I was trying too hard force the EBIX buyout into OUTD. The OUTD set up was a once in a year or two set up. The EBIX investment, to be honest, wasn’t.
3) I’d seen situations where short cases had caused huge spreads before, and I was upset I had missed them. For example, I thought the Teavana short case was weak, at best, but fear of the short case kept me from investing in a 10% in a month arb opportunity. I wanted to make up for that with this one. So I thought I was taking advantage of the short case by selling puts and minting free money.
4) On a related note to bullet one, I was having a great year. Something in me wanted to take that great year and turn it into a once in a lifetime year. Buffett has famously said he could do 50% in a year with less than a million dollars. I wanted to blow that out of the water. I wanted readers to be jealous when I posted my semiannual results review. And I was upset the bull market was keeping the S&P within sight of my results when almost all of my investments had no correlation whatsoever to the broad market.
Is the big loss I’m going to be realizing tomorrow the end of the world? Absolutely not. I probably got much too aggressive with the EBIX position sizing, but this loss will only take what was a great start to the year and turn it into a merely good one.
Honestly, it’s funny. Tomorrow I’ll likely just take a bath and sell all my shares in EBIX / buy back the puts in EBIX. I bet there will be plenty of investors joining me in that. That type of forced selling is exactly the type of situation I’d normally be interested being on the other side of. But tmr, I’ll be on the wrong side of it.
Is it a fun lesson to learn? No. Is it fun to write this post? No. But I think it’s necessary to be able to come out and admit both the good and the bad in investing.
Maybe next time I stray too far from what’s really in my circle and get too full of myself, I’ll remember this post (or a reader will remind me!) and I’ll catch myself.
Disclosure- Long (unfortunately!) EBIX. Long IFT, LAKE.
Stocks Discussed: EBIX,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.