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You're at a fruit market. But, instead of just being able to buy apples at this fruit market, you can also sell fruit.
You're not a farmer, so you come to the market to buy some apples and you see two fruit stands. Fruit Stand A on the left
is buying and selling apples at 50 cents apiece. However, Fruit Stand B on the right is buying and selling apples at 53 cents
apiece. People are buying and selling apples at these two stands all the time, and the price at a stand could change at any
moment. But, while you're there, apples are 50 cents and 53 cents, respectively.
You're a smart person, and you quickly
realize that you can buy apples from Stand A and then sell them across the street to Stand B and make a 3-cent profit. But
you have to do it now; you can't wait. So you buy all the apples at Stand A and then run to sell them all to Stand B.
Congratulations.
You've committed fruit-stand arbitrage.
Arbitrage is exactly that: the selling of the same item between two different
markets to make a profit off the mathematical differences in price. However, it's not apples that are traded--the goods in
question are usually stocks, currencies and other securities. Arbitrage happens when you get a stock, usually a common one
like General Electric that's traded on multiple markets (Japan, Hong Kong, U.S., etc¿). The stock is usually worth within
fractions of a penny the same on each of those markets. However, there are often some minor variations.
People who
participate in arbitrage take advantage of these variations--and make a ton of money doing it. As seen in the fruit stand
example, you can make a "riskless profit" from buying and selling apples between different markets.
There are some
big hedge funds that make almost all their money off arbitrage. But, despite this simple example, arbitrage is mathematically
complex--and involves a good portion of risk if you don't know what you're doing. You probably won't be able to participate
in arbitrage directly, but you can always invest in a mutual fund that does.
Home / Markets / Industries / Finance
Thursday, June 12, 2008
William Blair & Company Initiates Coverage of E-House (China) Holdings Limited With Outperform Rating
Comtex
CHICAGO, Jun 12, 2008 (BUSINESS WIRE) ----William Blair & Company initiated research coverage of E-House (China) Holdings Limited (NYSE: EJ) ($13.04), a leading real estate services company in China, with an Outperform rating and Aggressive Growth company profile.
Analyst Brandon Dobell estimated that the company, which provides primary real estate agency services, secondary real estate brokerage services, and real estate consulting and information services, would earn $0.81 per share in 2008 and $1.13 per share in 2009.
"We believe the growth in residential real estate development in China, combined with the efficiencies of outsourcing noncore processes, will help E-House generate significant growth over the next decade," Dobell said. "While we recognize that not every developer will view sales-and-marketing functions as noncore, we expect many developers to recognize the service level and cost-savings benefits associated with the expertise, processes, and coverage provided by outside sales-and-marketing providers like E-House and turn over these functions to the company. We also believe that scale and brand will drive market share in the real estate services industry, and E-House is well positioned here as well."
He added, "In the coming years, we expect E-House's revenue growth to benefit not only from outsourcing sales-and-marketing functions for residential developers, but also from penetration of related opportunities in consulting, information services and market research."
William Blair & Company, L.L.C. has received compensation for investment banking services from the company within the past 12 months, or expects to receive or intends to seek compensation for investment banking services in the next 3 months.
Brandon Dobell owns shares of the security.
William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.
For important disclosures and information regarding the firm's rating system, valuation methods and potential conflicts of interest, please visit: http://www.williamblair.com/Pages/news_story_dept.asp?uid=1379&depID=4
Additional information is available upon request.
SOURCE: William Blair & Company, L.L.C.
William Blair & Company, L.L.C. Tony Zimmer 312-364-8611 tzimmer@williamblair.com
Copyright Business Wire 2008
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