information arbitrage book

INFORMATION ARBITRAGE ALERT

An information arbitrage exists when a disconnect between stock prices and available public information on a company is noticeable, and monetarily worth pursuing.

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The market is pricing our new stock idea to fail, but a new development should lead to consistent revenue, cash flow and profits for the next 7 years. Please read on…

Why Information Arbitrage?

We don’t take Information Arbitrage (Info Arb) lightly. It’s actually one of the most important aspects of our research that gives us a distinct advantage over the rest of the retail investor crowd.

It’s for this reason why when we come across it, we share it with our Premium Member base as quickly as we can.  By the way, it’s a great way for any investor of any level to learn more about finding information that others don’t realize exists, and just might be the best way to profit in the market.

The nice thing about hunting for InfoArb in the microcap universe is that the market can be slow to react to the Arb, giving everyday investors the chance to capitalize on information disconnects. In the case of our current information arbitrage, we have information not readily noticed by most investors that we think will be the spark to catalyze a move in a stock that we’ve been seriously following for the last couple of years. We took a long position above current market prices back in 2018.

If you know anything about GeoInvesting, as long as we have conviction in a company, we are usually in it for the long haul. However, InfoArb can be a great tool to help capture short-term gains as you are waiting for your longer-term holdings to pay off. You’ll also quickly find out that we tend to be contrarians (bet against the crowd), which has led to out-sized gains in stocks that other retail investors first ignored, giving us the clear first mover advantage, especially when we find InfoArb for our Premium Members.


InfoArb Case Study: Contract Award and Form 4 Information Disconnects

Take, for example, Retractable Technologies, Inc. (NYSE:RVP), a company that designs, develops, manufactures, and markets safety syringes and other medical products for the healthcare industry. In early March 2020,

  • We noticed that the CEO had been aggressively buying stock for a long period of time to the tune of 100’s of thousand of shares
  • RVP announced the settlement of multi-year lawsuit with Becton, Dickinson And Company.
  • At the time of the initiation of our coverage, RVP was trading at an enterprise to sales multiple of ~1.2x, well below other medical device companies with EV/Sales well north of 4x.
  • It was a timely bet in light of the coronavirus, since stress would be put on the rest of the market to produce much needed needles.
  • Finally, the coup d’etat occurred when we came across a government website that mentioned RVP was awarded a coronavirus contract, potentially valued at $83.9M (This was eventually realized, by the way). We immediately delivered this information to our premium members. However, the company did not issue a press release on this new development for several days.
RVP Info Arb Summary

InfoArb Case Study: Conference Call and Press Release Disconnects

Another example of InfoArb is that of Intrusion Inc (OOTC:INTZ), a company that develops, markets, and supports entity identification, high speed data mining, cybercrime and privacy protection products.

The initial Info Arb was that INTZ typically released bland press releases, leading to bad optics for the company. However, the conference calls were entirely different and pointed to an inflection point coming soon. We want to make clear that most investors have little interest in listening to conference calls in the microcap universe, which is a huge reason why we do. Others tend to just read the press releases. With respect to INTZ conference calls:

  • We surmised that the inflection point was likely related to commercial opportunities.
  • We eventually determined that the company had a history of offering Info Arb on its conference calls after listening to several, quarter after quarter.
  • We then knew we were in a position to take advantage of future disparities between the live conference calls and written commentary.
  • Management often elaborated on:
    • Growth
    • New Product Lines
    • New Contracts
  • Stock appreciation was the result.
INTZ Info Arb Chart

THE NEW InfoArb IDEA

You might be asking, “Why show me past case studies? Every situation is different when it comes to Information Arbitrage.” While this may be true, that is the beauty of it. The discovery of new arbitrage is what makes this so exciting. It is a learning experience to build upon for future idea generation. We believe the current idea has shades of other InfoArb situations that allowed us to buy RVP and INTZ before the crowd.

SEC Filing Information Disconnect With Large Contract

Details surrounding certain events of the stock we own have only been disclosed in SEC financial filings, which be believe can have quite favorable results…

LARGE CONTRACT AWARD

The company was awarded a relatively large and coveted contract that was formerly routinely given to a competitor. Although the competitor contested the decision, it was ultimately withdrawn such that new, meaningful revenue will now be realized for the target company.

STOCK PRICE

The company’s stock price has been trending up, perhaps as more people dig into the story like we have. Should the company become profitable, we believe this price movement will continue. Management has already proven with their last quarterly report that they are moving in the right direction.

INFORMATION

Not everyone has the wherewithal to dig up all the relevant information if they don’t know where to look, preventing the stock from entering their radars. But we can tell you exactly where it is and why it’s important for the future of this company.

COVID-19

With the company’s stated resumption of revenue, it can now begin to focus on its business plan to move forward with the contract win and its existing business.
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Why We Are Proud Of Our Work

  • Over 50 companies profiled on Geo acquired, nearly all at a premium to previous day’s closing price, or price since inception of coverage

  • 26 percent of all our disclosed longs have at least doubled at their peaks during the holding period of the position on GeoInvesting.

  • GeoInvesting longs compiled average is over 44% since 2014.

  • Stats show that even after we closed our positions, if we had held our positions, the returns would have dwarfed what we reaped, reinforcing the case for longer-term investing.

  • GeoInvesting longs (termed GeoBargains in the early years) compiled average was over 30% from 2009 to 2014.

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“Thank you for your e-mails. I am glad that I was able to join GeoInvesting. Microcaps are one of the very few niches where a retail investor can do well, and your service looks sincere and solid. I learnt to know about it from a podcast interview with Nate Tobik and Fred Rockwell. I’ve bought a small bucket of stocks that are in the portfolios but haven’t run up yet. From now on I will focus on the daily morning newsletters and add something new that looks promising. I’m grateful that you make the information available through e-mail and not only through Twitter.”

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What We Are Offering You

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It’s simple. We are giving out a coupon to the first 7 people who want to take advantage of this and other Information Arbitrage opportunities that arise at GeoInvesting. With the code INFOARB1, you’ll receive a special quarterly rate, offered sparingly from time to time. We don’t know the next time we will have an offer like this, so consider this a bit of a gift.  As detailed below, the coupon results in a Premium GeoInvesting subscription at $123/quarter, or 59% off the regular rate of $300 per quarter. You’ll get a personal welcome from a member of our team once you complete the subscription process, so see you on the other side!

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Nothing contained on GeoInvesting or its correspondences should be considered investment advice, an offer to sell, or a solicitation of an offer to buy any security, nor shall GeoInvesting offer, sell or buy any security to or from any person through this site or reports on this site. GeoInvesting, LLC is not registered as an investment advisor in any jurisdiction. The content and materials contained on this website are provided for information purposes only and nothing contained therein is investment advice nor should it be construed as such. Prior to making any investment or subscribing to any of GeoInvesting’s free or premium services and products, you should consult with professional financial, legal and tax advisors to assist in due diligence as may be appropriate in determining the appropriateness of the risk associated with a particular investment. To see full terms, please go here.