What Does a Portfolio of SPAC Warrants Look Like?
I’ve been trading stocks, warrants, options, etc. now for close to 25 years. And yes, I’m dreading the day I write, “I’ve been trading for OVER 25 years.”
As you probably know by now, I went to Wall Street, and worked as a market maker for one of the largest money management firms in the business. That’s how I first began trading.
I was never a “financial newsletter” junkie. Yes, I read Barron’s and watched Wall Street Week with Louis Rukeyser. But, I never subscribed to a financial newsletter.
And, even after all these years, I had no idea how massive the financial newsletter industry is, and how it works, until just recently.
It wasn’t until I started to write a newsletter this past year for The Warrant Observer that I had any interest in newsletters. But, if I was going to write one on warrants I figured I better get an idea of how people wrote them, format, etc.
What I found was part interesting, and part shocking.
First, it’s a MASSIVE industry that spends much more money on marketing than actual financial research or finding ways to make money.
Second, the stock pickers and “teachers” don’t run the big companies that sell newsletters. They’re run by marketing executives looking to sell, sell, sell.
And what sells the best? NEW strategies. NEW ideas. HOT sectors. It didn’t matter that some of the hottest selling info was on ideas that had already topped (at least for now, like crypto) because the marketers are looking for THINGS PEOPLE WILL BUY and not THINGS THAT WILL MAKE PEOPLE MONEY.
Now, part of it is that readers are entertained by the writers, which I get. I understand paying money to be entertained. It’s like paying to subscribe to Netflix.
But, I was surprised when I saw the portfolio of one of the top “stock pickers” in the industry. He’s a VERY entertaining guy, and I actually now pay for his newsletter. BUT, it’s definitely not for the stock picks.
Most of the stocks in his portfolio, in what has been a 10 year raging bull market, are losers. Honestly I don’t even see how you could randomly pick 50 stocks over the past few years and have over half of them be losers, and some with large percentage losses.
AND, during the time the portfolio has existed, over 4 years, he closed ONE position. It was for a gain, I’ll give him that. Like I said, he’s very entertaining and I LOVE his writing.
The other thing I found with having to be NEW in order to sell is that newsletter marketers have to come up with NEW ideas and strategies to sell newsletters.
This meant a lot of the “Guru Stockpicker, Joe Johnson (totally making that up, so sorry if you’re Joe Johnson and writing a great financial newsletter) has just released the strategy he has been using since he was 10 years old to beat the market EVERY year”, was just a lot of made up marketer talk.
The marketers running the firm would then scour stock records to find stocks that had done well that fit “Joe Johnson’s” strategy, if he ACTUALLY HAD been trading it since he was 10 years old.
Probably shouldn’t have been, but I was surprised again. But, hey, maybe Joe is an entertaining writer.
Which brings me to the newsletter that I decided to write for subscribers.
So, first, it has to be NEW stuff, or no one will buy it. That’s actually pretty easy since no one really writes about warrants the way I do, at least that I’ve found.
(Speaking of, gotta tell you guys this quick aside. There is another warrant “guy” out there, not naming names, and he doesn’t really write that much about warrants anyhow. What he does do is promote other writers who write about the market and get a commission if you sign up for their service. NOTHING wrong with that. I may do it myself at some point. BUT, the most recent “note” from the people he promotes said something like, and I’m paraphrasing here, “6 million people might die from coronavirus which will crash the market, so you better listen to what we have to say, and pay us for it.” I mean, really.)
OK, back to my not promoted by claiming millions of people will die newsletter.
So I’ve got NEW covered, now I needed strategies.
I actually do have a lot of strategies I use when trading warrants. Patterns I’ve seen for close to 25 years that repeat over and over, and over and over, etc. Kinda boring, but it makes moolah. And Warrant Observer members seem to like that.
But, as part of the monthly newsletter I wanted to introduce a different strategy that is both new to the market, and new to me.
So, I told readers I had been doing this strategy for many years when I really hadn’t….kidding, I kid.
What I did was tell subscribers I had a strategy I wanted to test for a year to see how it did. And, that I had not used it before, but I thought it had potential.
Now, one of the problems with SPAC (special purpose acquisition company) warrants is that if the SPAC does not do an acquisition the warrant can go to zero. High risk.
But, if the SPAC just “announces” it is going to do an acquisition, whether it actually ever does or not, the warrants can easily double in price. High reward.
In order to mitigate the risk, but still capture the reward, I proposed a portfolio of SPAC warrants. A SPACfolio. And now, after one year, I’m ready to share exactly how that portfolio performed.
Warrant Observer subscribers have already seen the performance, since they get access to the portfolio as part of their subscription.
But, in this month’s newsletter, which will be coming out at the end of the week, I’ll be breaking down the portfolio in detail. And, showing how one could build such a portfolio themselves.
Did the approach work? Better than I could ever have expected.
Can anyone, even someone who has never bought a warrant, employ it?
Well, after talking with my 16 year old daughter about how to do it, I think you’re good.
Will the portfolio produce large winners (seems that’s all the kids want these days)?
The two positions that were “sold” out of the portfolio as of December 31, 2019, were for 157% and 163% gains. Big enough for me for several years of returns, but you’ll have to be the judge of that. (One more was sold this month for another huge gain, which I talk about in the newsletter.)
And, it didn’t even include hot SPACs like Virgin Galactic, or everyone’s favorite, Phunware. What a winner that one was.
The newsletter will be sent to subscribers this Friday, January 31. It’s NEW. It details a killer strategy. And once Friday passes its gone. Get on the list here: