Value Investing Philippines was aware of the opportunity at EDC tender offer. I have recently made a post about it at EDC Tender offer. We successfully spotted the opportunity, the only problem was, everybody did so too.
So here’s what I learned. First, opportunities likes these are very easy to spot and very easy to interpret as something that would provide an easy profit. In other words, everything was easy and everybody knows it too. There was no special insight to be had to know that you’re going to make money if you bought EDC below its tender offer price. So the lesson learned here is that, if its easy to spot and most people agree with you, there’s probably less profit to be had. Which happened on EDC.
EDC was a riskless investment. But since everybody knows about it, the profit margin became small. 3% at most probably. There’s no free lunch to say the least.
Second thing I learned was that, opportunities like these probably gave you a chance before. A long window to take advantage of it. EDC was trading at 5 for about a year and nobody even noticed it. Like me. I wasn’t aware of it since I was busy with other things last year. I just recently focused full time in investing so this one slipped me. But for the investor who was paying attention, the payback must have been huge. You have a year to accumulate shares of it.
And the third lesson is that. Opportunities come and go. I did not participate in this opportunity because of the small profit margin. And I don’t want to tie up my money for 2 – 3 months waiting for the tender payment. So in other words, the lesson here is that, even if you didn’t get the opportunity, things can always happen again in the future and you might be better prepared for it.