2024: An Eventful Year

This is my second annual look back at how things unfolded during the year on three different fronts: personal, business and investment performance. The first article, 2023: A Rollicking Year, can be found here.

Personal

Thankfully 2024 wasn’t as much of a rollercoaster on the personal front as 2023. The year started out on a high note as I started to prepare for the launch of my first book The Event-Driven Edge in Investing. During the course of the year, I got a chance to be a guest at seven different podcasts and was interviewed for a segment related to stock spinoffs for NPR’s Marketplace show. While most of those appearances were related to the book launch, three of them focused on specific investing strategies or a deep dive on a specific idea including:

• ?The Yet Another Value Podcast with Andrew Walker where we discussed the hotel REIT Pebblebrook Hotel Trust (PEB)
• The Stock Spin-off Investing Podcast with my friend Rich Howe where we discussed two spin-off situations
• Zach’s The Market Edge Podcast with Tracey Ryniec where we focused on insider transactions

For the most part I was able to stick with my daily “non-negotiables” like learning a new language (Spanish) and working out. In an era of Ozempic-related weight loss, I was trying to go the other direction and gain weight each month through strength training. Hopefully some part of that weight gain in 2024 was muscle.

I was lucky enough to be invited to a dinner after the 2024 Berkshire Hathaway annual meeting where the author William Green was a guest speaker. I enjoyed his speech, briefly ran into him again the next day at the Markel brunch and then checked out his book Richer, Wiser, Happier, which I reviewed here. Some of the other books I got a chance to read in 2024 were Zen of Thrift Conversions by James Royal, PhD and The New World Economy in 5 Trends by Koen De Leus and Philippe Gijsels . I whole heartedly recommend all three books.

InsideArbitrage Business

I had the ambitious goal of growing InsideArbitrage revenue by 50% in 2024 after exceeding my 35% growth target in 2023. Unfortunately, ?this year I fell far short of that goal and revenue grew 31%. My target for 2025 is 30% revenue growth.

Growth in 2024 was achieved through a series of experiments and especially by adding a large number of new features to the platform.

For our Yield Guru service, which completed its first full year in 2024, we added two custom screens including one that provides a list of preferred shares with insider buying (the exact opposite of what I discussed with Andrew Walker on his last podcast) and a list of special dividends that we keep updated with recent announcements.

We also expanded our core InsideArbitrage Plus and Premium services by rolling out a series of new features including:

• An AI chat option on the quotes page for every company that lets you ask questions to three of the top LLM models simultaneously. This weekend we updated the models to the latest ones provided by Open AI, Google and Anthropic.

• A proprietary stock ratings model called IA Score that not only looks at trailing metrics but also forward looking factors including trends related to revenue growth and profitability. We also decided to allow investors to remove momentum or valuation factors and see how the model performed without those factors for their stocks.

• My Portfolio Plus, a feature that lets you build your own portfolio and view specific event-driven information like management changes, spinoffs, buybacks and insider transactions, easily access SEC filings, and see valuation information.

• Detailed deal postmortems and learnings from key M&A failures. We will be adding to our deal portmortem repository this month to cover the Albertsons – Kroger deal and eventually the U.S. Steel – Nippon Steel deal.

There are also features like our new earnings calendar and a custom screen called Insider Buys Near Highs that we have not yet announced publicly.

InsideArbitrage Model Portfolio Performance

Some of the positions that worked for the model portfolio in 2023, continued to work in 2024 (GE, ITT, Vertex Pharmaceuticals) and even most of the failed mergers from 2023 that hurt returns in that year, rebounded strongly in 2024 (TEGNA, First Horizon and especially Tower Semiconductor). I should have stayed with that 2023 failed mergers group longer to benefit from their strong performance in the second half of 2024. We also benefited from some of our short positions in Gamestop and Energy Vault Holdings, which cratered more than 90% from our short price.

We were very early to going short Carvana in 2024 and that hurt returns.?Merger arbitrage hurt us for a second year in a row with the failed mergers of Spirit Airlines and Capri (CPRI).?Both the volume of deals announced and the total value of deals fell for a second year in a row as you can see from the charts below. The tide will likely turn in 2025 with a new administration and a new head of the FTC. The model portfolio was fully invested just in time for the big decline in the S&P 500 in 2022. The model portfolio?outperformed the S&P 500 for the 2022 to 2023 period but underperformed in 2024 with a gain of just 3%.

I am excited for 2025 with the way the portfolio is currently positioned and the fact that the Carvana short is finally heading in the right direction after Hindenburg’s latest research report: A Father-Son Accounting Grift For The Ages.

I am also super excited for the launch of a new podcast that starts next week and a potentially more lucrative fishing pond for the merger arbitrage strategy.

Disclaimer: I hold long positions in GE, Pebblebrook Hotel Trust, TEGNA, Vertex Pharmaceuticals and Capri. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.