Investment Strategy

Since 2001, I’ve followed a deep value strategy built on the best practices of Buffett, Icahn, Greenblatt, and Graham, advocating for investments based on business fundamentals and utilizing financial engineering through options and arbitrage to hedge and improve long-term performance.

Core Tenets

  • Price to Earnings Ratio under 12
  • Debt to Income Ratio under 5
  • Return on Equity Average over 12%
  • Operating Costs to Income Under 75%
  • Capital Purchases to Income under 75%
  • Gross Profit Margins over 25%
  • Consistent Growth in Earnings
  • Consistent Growth in Book Value
  • Consistent Growth in Sales
  • $1 for $1 retained to market growth
  • Meet 15% baseline growth estimate
  • Never buy at 52 week high prices


Arbitrage arises from corporate activity. During a typical year, there are hundreds of corporate mergers taking place. It’s the nature of the business. In these trades, there is a specific price that is agreed upon by the parties before the buyer conducts due diligence. This price is rarely reached before the deal actually closes, leaving a percentage of profit to the investor.

The margin of safety with Mergers and Acquisitions (M&A) is fairly high as long as investors stick to all cash deals void of major regulatory concerns. In 2016, there were 200 completed M&A deals compared to 16 not completed. There were 91 pending deals as of December 2016, with 19 deals that offered greater than 20% annualized profit potential, 9 of which are all cash.

Trade Example:

XYZ is being acquired by ABC.
ABC is paying $9.00.
XYZ has a price of $8.51.

The deal is closing in 3 months
The margin interest is 0.50%

On 1,000 shares, you would pay ~$45 to borrow the money and buy the position on margin. If and when the deal closed, you would earn $490 minus the money you borrowed less any trading fees. That’s 10x on the borrowed money, and a 6% net gain. Done every quarter, that equates to 26% annualized returns.


How would like to keep 100% of your cash and make money every month whether the stock market as a whole goes up or down? Sound too good to be true? Well, it is.. However, the next best thing is a cash generation strategy that utilizes writing (or selling) stock options contracts to create a steady flow of cash, every month.

Writing Covered Calls

When you write (i.e. sell) a Covered Call Option, you give the right to someone else to take the stock away from you. This is beneficial when you already own a stock and want to make money while waiting for the price to reach a specific level. For example, if you own XYZ at $10 and write a call at $12, you collect a premium from the contract. If the stock is called away at $12, you keep the premium and the $2 profit. If the stock doesn’t reach $12, you still keep the premium.

Writing Naked Puts

When you write (e.g. sell) a Put Option you provide the right for someone else to give you the stock. This is beneficial if you want to own a specific company’s shares at a specific price, but the stock is not yet trading at that price. For example, if XYZ is trading at $10 and you want to own it at $7.50, you can write a put at $7.50 and collect a premium from the buyer who may be trying to protect his/her position in the stock. Naked put writing is a great way to buy into positions during volatile markets.

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