Is it possible to profit from the shift from buyback to big deal making? Theoretically, yes. There are three exchange-traded vehicles for the merger-and-acquisition (M&A) enthusiast. The IQ Merger Arbitrage ETF (MNA) has been reasonably successful at identifying takeover targets while shorting other stocks.
Another possibility is Credit Suisse Merger Arbitrage Liquid ETN (CSMA). This exchange traded note takes long positions in targets while simultaneously shorting the acquiring firm. The results seem to indicate that the strategy has not been successful.
Supporters maintain that arbitrage strategies are remarkably potent in diversifying away from stock and bond risk. Moreover, hedge funds have used them with varying degrees of success at wealth accumulation. From my vantage point, however, these exchange-traded trackers do not have the liquidity necessary for reducing the exposure to risk assets in a 2nd half sell-off. Without question, the probability for such an event is high. I would rather have a bit of cash on the sidelines, while maintaining a defensive posture in iShares USA Minimum Volatility (USMV) as well as an opportunistic posture in Asia via iShares MSCI Asia excl Japan (AAXJ).