Arbor Capital Management is one of the few advisors practicing the conservative, yet successful arbitrage tactics of Graham and Buffett. When applied prudently and conservatively, the use of arbitrage has shown to be an effective way to enhance returns while reducing overall portfolio risk. Arbor Capital Management believes that arbitrage can add several percentage points of yearly gains to accounts. When compounded over time, arbitrage can make a significant difference in the value of an account. Let s further assume the deal will close in three months.
Risk reduction is paramount in our arbitrage accounts.
Each investment selected must offer a high annualized return, yet bear a minimum chance of loss. Since the beginning of 1998, the average U.S. stock has fallen in price, despite the much publicized performance of major indexes. Investors who have used arbitrage over this period have been able to greatly increase their probabilities of gains and partly insulate their portfolios from the effects of market volatility. How Money is Managed Special situation investing takes many forms, from highly speculative derivatives spreads to simple workouts. Our research has shown that the most profitable form of price arbitrage involves buying stocks of companies involved in mergers.