Robert%20Rubin

1
Proven Money Making TacticsPart II

• Robert Rubin
• July 11, 2007

2
Buy Chinese ADRs Before The Chinese IPO

• Many Chinese companies issued ADRs outside of
  China without issuing stock in China
• Early discomfort with capitalism
• The Chinese exchanges are rushing to catch up
• Shanghai and Shenzhen
• IPOs in China for stocks already traded here
• Chinese IPOs create huge new demand for stock
• Chinese eager to invest, so IPOs oversubscribed
• Caution Chinese government raising taxes and
  interest to lower liquidity
• Prices soar after IPO, despite new shares
• Example GSH (Guangshen Railway Company)
• 12/15/06 - Last day before IPO closed at 27.81
• 1/3/07 closed at 35.24 a 26.7 gain
• Price began rising two months before
• English version of Peoples Daily for Chinese
  business news
• http//english.people.com.cn

3
Buy Stocks After Special Dividends

• When stocks issue special dividends, they usually
  return to the pre-dividend price within 6-12
  months
• Special dividends are large one-time dividends
• Dispose of cash the business can not profitably
  use
• Acquire debt to make themselves unattractive
  takeover target
• Buy stock on ex-dividend date
• When stock price adjusted down to reflect the
  special dividend
• Price rise after dividend announced lowers
  profit, so wait for ex-dividend
• Make sure the company is a stock you want to own
• Not liquidating or lacking future plans
• Sell when the stock returns to its pre-dividend
  price
• Example SKS (Saks) went ex-dividend 12/01/06
• Price fell from 20.52 on 11/30/06 to 16.88 on
  12/01/06 after 4 special dividend
• Price closed at 20.67 on 7/05/07 (back to
  pre-dividend price) a 22.45 profit

4
Short Stocks Before IPO Unlocks

• Lock-up Agreements stop insiders from dumping
  their stock after an IPO
• Commonly for 180 days
• Prices fall and volumes rise before and after
  unlocks
• Average prices start to fall before unlock
• Start to fall 1-2 weeks before, continue for 1-2
  weeks after
• Short or buy puts 1-2 weeks before unlock
• Example FSLR (First Solar)
• 28.50 on 1/3/07
• 69.63 on 5/7/07
• 64.126 on 5/16/07 (unlock date) a 7.9 drop
• 62.03 on 5/21/07 another 3.3 drop
• 96.29 on 7/6/07
• Free subscription to Dynamic Market Alert
  includes IPO unlock dates with every days issue
• http//www.taipanfinancialnews.com/dma_archive.htm
  l

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Find and Buy Acquisition Targets Early

• Companies often sweeten executive compensation
  when they receive unsolicited bids
• Extra bonuses protect executives who might have
  to go
• Companies must report new compensation
• SEC Form 8-K, Section 5.02
• Learn about likely mergers before announcement
• Example OO (Oakley)
• On 5/31/07, Form 8-K, Section 5.02 says Long Term
  Incentive Plan payments after Change of Control
  will be twice normal
• On 6/20/07 Oakley and Luxottica announce OO sale
  for 29.30
• OO at 25.42 on 5/31/07
• OO at 28.45 on 6/21/07 an 11.9 gain
• www.sec.gov

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Buy (the right!) Options Instead of Stocks

• Invest a fraction of what you would for stock
• Lower your cost, not your potential profit
• Buy deep-in-the-money long-dated options instead
  of stocks
• In-the-money options give you gains and losses
  close to the underlying stock
• Deep-in-the-money options likely to stay in the
  money despite volatility of the stock
• Long-dated options give your investment time to
  mature
• Example GOOG (Google)
• 539.40 close on 7/6/07 so 53,940 for 100 shares
• 284.70 Ask for January, 2009, 280 calls so
  28,470 for 1 contract
• If GOOG rises 100, you would make the same
  10,000 profit on both
• Do the same with puts if you expect the price to
  fall

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Buy Dividend Stocks With DRIPs

• Stocks returned 10 per year in the 20th century
• 6.7 after inflation 4.6 dividends 2.1
  capital gains
• Dividends have been 68.7 of total returns
• Growth stocks often underperform over time
• Seldom pay dividends must beat exaggerated
  expectations
• Old Economy stocks often excel over time
• Pay higher dividends easy to beat low
  expectations
• Dividends often do more than share price over
  time
• The price you pay for dividends is critical old
  idea that still works
• Use Dividend Reinvestment Plans (DRIPs) for
  buy-and-hold
• Dividends automatically reinvested in stock, so
  they compound
• Buy stock from company, bypassing brokers and
  commissions
• Automatic purchase plans available for dollar
  cost averaging
• Some companies offer a 2-10 discount off the
  market price