Why You Need Event-Driven Stocks

By choosing to invest in a particular security, one question that must be asked is what is the catalyst, the mechanism by which a stock appreciates? To a value investor, the answer is usually that value is its own catalyst. You buy something for $20 that is worth $50 and over time, due to the generation of cash flows, the gap between price and value narrows.

Yet another catalyst -- one that doesn't come around often but is lucrative -- is the existence of a specific event or potential event that will unlock value. Call them event-driven catalysts. The most generic form is merger arbitrage: a stock trades at $8 that is being acquired for $10 at a future date. You bet that this buyout "event" happens, thereby booking a 25% gain based on the occurrence of this event. Event-driven catalysts can take many different forms. These are a few names with underlying event-driven catalysts or the potential for catalysts....406 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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