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Investor focuses on overlooked niche: warrants

Rachelle Berube, 38


Property manager

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Mutual funds purchased long ago and, more recently, the stock warrants of Mega Brands Inc., Lanesborough REIT, Manas Petroleum Corp. and other companies.

The investor

Rachelle Berube runs a property-management firm. There's rarely a dull moment, as her blog at highlights.

Her stock portfolio had a meltdown from 2008 to 2009. "I was just so mad when I lost all the money," Ms. Berube says. So she "read and read and read" and ended up developing an expertise in an overlooked niche: the 200 or so warrants trading on Canadian exchanges.

Issued by companies, warrants are longer-dated options to buy their shares at prescribed strike prices. Professional investors tend to ignore them because of thin trading volumes.

Her approach

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One of Ms. Berube's strategies seeks to capitalize on the volatility arising from low trading volumes. With the help of her Globe Investor Watchlist and, she scans for low prices in warrants with about a year to go until maturity. She'll purchase some if a Google search doesn't turn up any bad news on the company, and there is technical strength in the underlying security.

Immediately after buying, she'll put the position up for sale at double the purchase price, and then wait. "[Within]one year, I feel pretty secure that there will be a spike in the stock price, or news that will bring the price up," she explains. There are no market makers [persons who facilitate trading in a security by buying and selling it]for most warrants, so when there is a spike in volume you can do very well."

She may also buy the warrants of a company that she feels has good prospects, such as Mega Brands.

"My son loves those Duplo blocks," she adds.

After three years of applying these and other warrant strategies, she reports more than a fourfold gain on her original investment.

Best move

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She made a 600-per-cent gain on a warrant position in December, 2010. Her sell order should have stopped her out with a 100-per-cent gain but technical difficulties in the trading platform had cancelled it.

Worst move

Buying shares in Fannie Mae and Freddie Mac during the financial crisis of 2008 (they were subsequently delisted).


Find an investment approach for which you have an affinity. "You'll be motivated to learn about it and that knowledge is what will make you money."

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