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Buy-on-rumors strategy

Investors who follow the buy-on-rumors strategy invest in special situations such as squeeze-outs, takeover candidates or in the rebalancing of indices. Such special situations open up extraordinary opportunities for investors to make price gains in the various markets.

Price boosts in squeeze-outs

Squeeze-out procedures offer a whole range of share price opportunities because of the economic conflict that arises between the majority and minority shareholders. During the ongoing process, the balance of power between the conflicting parties changes until a result emerges in the ups and downs of the price-fixing process.

Rumours germinate in the course of the proceedings, which are probably also deliberately spread by the various stakeholders. Investors who already have some experience with the behaviour of parties in https://exness-ch.club/ in squeeze-outs can profit from this.

Bubbling rumours about takeover candidates

When one public company wants to take over another, this often leads to the share price of the company to be taken over rising sharply and for a long period of time as a result of strong share buying. One of the unwritten laws of the stock market is the above-average price performance of takeover candidates.

One of the outstanding examples in recent stock market history is the takeover battle between VW and Porsche, which caused the price of the VW share to rise to astronomical heights at the end of 2008. Investors who positioned themselves correctly and, above all, in good time were able to make significant profits.

Index Changes - Opportunity for Traders

Shares that are newly included in a selection index or whose weighting is increased can tend to rise. There are several reasons for this. More and more investors are becoming aware of these stocks. Nevertheless, a number of factors must be taken into account. 

Investors who want to earn money from a reweighting in an index should position themselves early on with potential moving-up candidates. The problem here lies in obtaining the necessary information. 

The background to price surges in the event of index changes can be seen on the one hand in the fact that index inclusion spurs the growth fantasy, and on the other hand institutional investors who track an index are obliged to adjust to the changed weighting or new index composition as well.

Buy-on-rumors strategy challenging

For private investors who trade rather few stocks, speculation on special situations is not particularly well suited. Buy-on-rumors strategies have the decisive disadvantage that special situations are difficult to predict and accurate information is not always readily available.

Moreover, private investors should keep in mind that the time span until the desired scenario occurs can take several years. Such investments should be planned with a broad horizon of several years (5 to 10).