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Originally Posted by glassman
Great points again Greg. I had forgotten "compounding dividend vs stock growth" (either are important when comparing your ROI vs TR) and refreshing our memories about this is an important (cause its mentioned a few hundred pages back).
On another note, AT&T bought Directv some time back and I missed this transaction on the news. I'm a huge Directv fan and also just found out they launched some "gigatron spaceship" satelite for better band width as video and on demand will become bigger "players".
I see them A- merging (still pending FTC approval) for better market diversification and B- Directv i'm sure sees the programming side "not growing as much" (with the competitors changing how we can prescribe our own programming) so i believe their positioning themselves into a much more wholesaler role. Does this make sense?
Sorry i know this is a "how to buy" thread, not "what to buy" but i'm hoping my third paragraph is more related to thinking theory.....
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First rule of investing.... don't buy anything based on what could or might happen. Buy based on what is at the time. Anything from then on is considered being lucky and is a gift.
What happens is you buy based on some proposed merger or acquisition.... then the government steps in and doesn't allow it or a competitor steps up and makes a competing offer.... and on and on. Sometimes the brains that are much larger than ours - and they have more money (remember that we're always just along for the ride) step in and sell their shares because the purchasing company is acquiring too much debt in the deal... OH BUDDY --- I've seen all these scenarios. I'd refer to this as "being cute". The minute you do that - you get your ass handed to you.
This "being cute" (not saying you did this or that anyone is doing this - remember just responding to "everyone" reading) is called ARBITRAGE on wall street. You're trying to place a bet based on what you think will be the outcome... you can bet on the company being acquired... by buying their shares thinking the board will reject the first offer and the acquirer will raise their bid... or you can buy a competitor thinking that if this deal goes thru for the higher price (usually buyouts come with premium price paid) that it will raise the P/E for the "others".... There's a hundred scenarios to be played. I used to do this all the time. Most of the time it never worked out the way I thought. When it did - I was a hero in my own mind.
If you're young - and smart - and want to game this stuff... and have 10K you're willing to play with... it's fun as hell and can be very profitable. Nothing wrong with it. It's only "wrong" when you bet and it goes against you. Then you sell - and the next week - there's different news and your bet would have paid off.... it's just the way these kind of bets go. Then it's more about knowing what you're doing and knowing yourself and how strong or weak your hand is.