How to make a fortune out of hostile takeovers?

I see hostile takeovers as a great short term investment opportunity. This idea is primarily driven by behavioral finance. Whenever a large organization or a billionaire investor tries to pursue a hostile takeover of another organization, markets over react to this message. Let me give an example: On October 11, 2012 Carl Icahn, the billionaire investor and activist pursued a hostile takeover of Oshkosh Corp.  From a stock price of $27.2, the stock bumped to $31 in a day and settled at a price $29.73 on the next day.      

  

Explaining the phenomena, investors expect a short term surge in the stock. There could be two reasons: First, they expect Carl Icahn to create a breakthrough in the organization. Second, they expect a surge in the demand for the organization’s stock after Icahn’s investment. 

There are two patterns that we have to notice. First, there is a surge in the Stock Price. Second, investors over react on the day the news is released. The return on 1-day and 2-day basis is 13.97% and 9.3% respectively. If we annualize this return it’s a crazy number which is clearly a fortune. If an investor invests $1 Million by buying the OSK stock he would make $139706 in one day. This is about five times the median yearly salary in the US.    

Fig. 1: Return estimated on 1-day, 2-day and annualized basis

Oshkosh Corp (OSK)	Stock Price
Initial Price (10/11/12)	27.2
1 day - high	31
2days	29.73

OSK	Daily Return	Annualized Return
OSK	Daily Return	Annualized Return
Growth - 1 day	13.97%	53625119998456700000000%
Growth - 2 day	9.30%	1120072008%

Fig 2: Stock price of Oshkosh Corp.