Start the conversation
But to get windfalls like these, your need to know which SPACs to buy before they announce deals with their acquisition targets.
So today, I'm going to show you exactly how to do that today with our two best SPACs to buy. They're led by two legendary investors with track records of success in taking private companies public via a SPAC acquisition.
But first, let's make sure you understand what a SPAC is before we get into specific stock picks...
SPACs are blank check companies that raise money to buy a company, usually in a specified industry or sector. They have a limited timetable to find an acquisition candidate, usually two years. If they don't get a deal done in that time frame, they have to give investors their money back.
Once the IPO is completed, most of the money raised goes into a trust fund that is invested in short-term U.S. Treasury bills.
Once they find a target company to buy and announce a deal, shareholders of the SPAC have a choice. They can keep their shares and become owners of the new company, or they can redeem these shares and get their money back if they do not like the deal for some reason.
We can make a lot of money with the best SPACs to buy now. We have already seen some deals double or more once a deal was announced this year...
Draft Kings Inc. (NASDAQ: DKNG) has soared by five times the IPO price of $10.
And Virgin Galactic Holdings Inc. (NYSE: SPCE) has given its investors a return of 2.5 times the IPO price so far.
In total, there have been more than 200 SPAC IPOs done this year that could lead to as much as $300 billion in M&A activity over the next few years.
And this trend is probably not going to end anytime soon...
David Weisburd, the Venture Capital Advisor here at Money Morning, recently pointed out the trend toward SPACs replacing IPOs is growing stronger.
He wrote, "If the trend continues, as I believe it will, it could very well overtake and supplant the 'usual' IPO process in 2021. That dramatic increase is going to have a real bottom-line impact on more and more investors, radically increasing access to all kinds of investing opportunities."
The other thing that becomes obvious when you surf some of the SPAC investing groups and sites is that the vast majority of people trading SPACs have little to no idea what they are doing. They make the same mistakes individual investors have been making since the dawn of time.
They get caught up in the story and hype of the various offering and end up paying large premiums for SPAC shares before a deal is announced. They hope that when the deal is announced, the SPAC will see a huge spike in its share price.
That might happen. It might not. The market may hate the deal, and the stock price will drop.
How to Make Money with the Best SPACs to Buy Now
The key to making money in SPACs is to pay as small a premium over the value of the cash in the trust as possible. That way, if the stock does drop, you can redeem your shares in the trust and walk away at break-even or a minuscule loss.
FTAC Olympus Acquisition Corp. (NASDAQ: FTOC) is an excellent example of a SPAC that is trading at a minuscule premium to the value of the trust.
If the market hates the deal, the most you can lose is about 1%. If there is no pop in price, you simply redeem the shares for your interest in the trust and walk away.
Led by Chair Betsy Cohen, the management of FTOC has done three other SPACs in the financial services and fintech space that have ended well for investors. The three have all closed on acquisitions and trade at a premium to pre-announcement price.
Ms. Cohen is also a founder and former CEO of Bancorp Inc. (NASDAQ: TBBK), a bank that serves the unique needs of fintech companies. She knows the fintech and banking space as well as anyone, which gives her a huge edge when it comes to finding a strong acquisition candidate.
If the market does not like the deal for some reason, the current price allows you to redeem your shares and walk away with almost all of your money back.
If the deal does pop, either sell your shares or set a very tight trailing stop.
The other SPAC that looks attractive right now is Equity Distribution Acquisition Corp. (NYSE: EQD). Legendary investor Sam Zell leads the SPAC. Mr. Zell is known for his ability to spot trends in the economy and then locate bargains in the market that allow him to exploit those trends.
Zell is also widely recognized as the founder and father of the modern real estate investment trust (REIT) industry. He has also invested in other sectors, including industrials, manufacturing, logistics, infrastructure, energy, waste services, consumer products, communications, and healthcare.
Equity Distribution is looking to buy companies that are involved in the industrial supply chain business in the United States.
Post-COVID-19, we will see a massive remake of much of the supply chain in the United States. Companies that provide the technology to make distribution more efficient will make a fortune for themselves and their investors.
Those are precisely the companies this SPAC is looking to buy.
The current price of $10 per share allows us to walk away with a minimal loss if the deal does not work.
But it is much more likely that Zell pulls over another big win and the stock experiences a sharp increase when the deal is announced. The best strategy then is to set a trailing stop and ride the stock as far as it goes.
Three Stocks Even Better Than EQD
Chief Investment Strategist Shah Gilani just held his first-ever stock-picking lightning round event - running through more than 50 stocks to tell you if they are stocks to buy or stocks to sell.
Dozens are overpriced and overhyped - you should ditch them ASAP.
But Shah says THESE three stocks are "screaming buys."
All three are trading at a discount... they're under-the-radar companies most people haven't even heard of... and they have massive tailwinds ready to send their share prices into the stratosphere.
To get the company names, tickers, and price targets for Shah's picks, go here now.