Hedge funds in the search for the next mega deal - an unusual approach

If you will have a meeting with Warren Buffet in Omaha, and you want it to be kept secret, consider whether to go by car. Airports are under surveillance ...

In April, a market analysis company sent its customers a message that a Gulfstream V-owned Houston-based Occidental Petroleum-owned aircraft was spotted at Omaha Airport. There was immediate speculation that the Occidental board was negotiating with Berkshire Hathaway to get financial help. Financial assistance that tilts the balance in their favor for the deal for Anadarko Petrleum. Two days later, Buffet announced an $ 10 billion investment in Occidental.

"Where there is an airplane, there is a trail of rumors and facts." There are companies that "monitor" private hedge funds and a number of investors. Occidental aircraft information came from Quandl, which was acquired by Nasdaq in December. Quandl provides data to its customers from another company called JetTrack.

There is some evidence that private aircraft tracking can be used as an asset for learning corporate news even before it pops up in the media. A 2018 University of Oxford report, in conjunction with the federal science and technology department of Switzerland, showed that early tracking of at least seven mergers or acquisitions had been recognized in aircraft monitoring of nearly 30 public companies.

But whether this really gives a serious advantage to investors is another matter. The alternative information becomes more and more accessible, which is a prerequisite for its faster reflection in stock prices. At the same time, some private airplane owners do their best to keep their flights and schedules secret.

In fact, everyone can track an airplane online. Companies like FlightAware, which focus on civilian flights, let everyone monitor the location of thousands of planes. The data comes from the Federal Aviation Administration. However, what is not seen is the private aircraft - 28,000 in number. From small, single-engine to large intercontinental business aircraft. According to the FAA policy, the owners of these aircraft may claim that they are not publicly visible.

The FAA, however, is not the only source of this data. Many airplanes are equipped with a technology called Automatic Dependent Surveillance - Broadcast (ADS-B). This device broadcasts the transport code, airplane, model and type, position and speed of the airplane. It is expected that as of 1 January 2020, the FAA will oblige all airplanes flying in US airspace to be equipped with ADS-B. Anyone with the right equipment can capture the ADS-B signal and monitor all traffic. There is an ADS - B Exchange where this information is distributed by a network of such antennas around the world and is available for free.

However, this information is not useful for any hedge fund. Dictator Alert tracks airplanes registered by authoritative individuals - mostly from the Middle East and Africa. And those who fly or land on Geneva Airport, Switzerland. Then the information is published via a bot on Twitter. This service was initiated by two journalists with a personal ADS - B antenna near the airport.

Efforts by the US government, however, are aimed at blocking this type of monitoring. And in an ironic response to the politicians' attempt to protect the owners of private aircraft, ADS - B Exchange wrote on their website: "Every citizen who has at least $ 100 and the ability to buy things from Amazon can get this kind of information" .

Still. Acquiring basic information on a private flight is not enough to make an investment decision. You have to consider who owns the plane in question, or who can fly in it, and that is not so easy. It's not easy for companies' shells and foreign registrations.

Source: Bloomberg Finance L.P.

Photo: Flickr

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