Sharks Use Patterns, SPACfolio Investors Should as Well
We do many kinds of warrant trades at StockWarrantsHQ. But most of them have one thing in common…they are tied to a pattern.
With our SPACfolio/Shark Week ideas, there is a reason we buy these pre-deal announcement warrants. And, it’s because of the pattern.
In the vast majority of pre-deal announcement SPAC warrants, as long as you buy it right, the warrant moves higher on the deal announcement.
We went over Kensington Capital Acquisition in the post yesterday.
Today we continue with day two of SPACfolio/Shark Week.
SPACfolio/Shark Week, Day 2
Did you know sharks have “electroreceptors” in their nose/head. Their version of electric radar let’s them detect electrical signals given off by their food.
The hammerhead shark is especially adept at this. Their big, long heads let them “see” the electrical pattern emitted by stingrays that may be buried/camouflaged in the sand.
Get it, the “pattern”…
Here is a pattern I like to spot in a warrant prior to adding it to a SPACfolio. A move higher, and then a pull back.
Amplitude Healthcare Acquisition (AMHC/W)
Amplitude has displayed this pattern in the past few months, moving from the $0.60 level to $1.2 and then back to around $0.60.
Amplitude is in the market to acquire a healthcare company, most likely in the pharma space.
Amplitude’s management team is headed by a former Morgan Stanley banker, Howard Hoffen. Hoffen heads Metalmark Capital with a focus on gastroenterology, dermatology, and women’s health.
So we’re likely not going to get a COVID-19 vaccine target out of these guys, which is just fine.
Now, like many SPAC warrants, this one is thinly traded. As with any thinly traded warrant, if you decide to enter be patient and let the trade come to you. Which usually means having a bid in and waiting.
How about another pattern? Here’s one I like to use as a general rule.
I try to avoid buying SPAC warrants “early”, right after they split off from the common. As you probably know, when a SPAC goes public, they usually begin trading as a unit, a combination of a common stock and a warrant.
A few months after the IPO, the exchange splits the common and warrant, and they begin trading separately. Though you can still trade the unit.
Usually, the pattern is for the warrant to drop in price after this split from the common, so I don’t buy quickly after the split.
A perfect example, and our next potential SPACfolio type play…
Longview Acquisition Corp. (LGVW/WS)
Sticking with our healthcare theme (sorta)…Longview is looking to acquire a company in healthcare, but they also appear to be leaving their options open.
First, check out the warrant, just to see the pattern. The warrant started trading separately July 13th, when it traded up to 1.65. And today you could get it 38% cheaper.
This one is of a more recent vintage than I usually like, but a few newly trading SPACs have done deals quickly. So this is a bit of an expansion of the usual range I look at.
Longview is interesting, because like a tiger shark, it has the possibility of being unpredictable.
The Chairman, Larry Robbins, worked as an equity analyst and in boutique M&A…so a financial engineering, dive into the numbers guy.
The CEO, John Rodin, ran a brokerage that bought and sold cash flows generated by the activities of professional athletes. And he’s also a former Goldman guy.
And the CFO, Mark Horowitz, comes from a professional services outsourcing firm.
Longview could be a total wildcard, and come up with any number of targets. That’s a SPAC with a wide field of vision, and possibly a chance of outsized warrant gains.
Enjoy the water!