Continued from here: OK, so we’ve defined what a stock catalyst is, and also recommended you evaluate catalysts from an IRR perspective. This is the best way to highlight how they can deliver a dramatically improved return, due to the (potential) acceleration of value realization.
If you really want to complicate your life, you could also layer in an EV approach…the analysis that is, not the blog! Let’s not dig into the math/mechanics here, but it spotlights another attractive feature: A catalyst may prompt you to attach higher probabilities to positive/specific/increased return scenario(s), thereby increasing the Expected Value of your investment return. For example, Risk Arb (and many Event Driven) opportunities offer a specific price ‘target’ and timeline, with a high probability attached to this outcome, so EVs (and, of course, IRRs) can be pretty tasty!