Friday, February 05, 2016

Solarwinds = Done Deal

It’s nice to see that Solarwinds (Ticker: SWI) buyout by the PE firms: Silver Lake and Thoma Bravo closed today. I added aggressively to Solarwinds this past week as the annualized return was very attractive based on the anticipated closing date of today. I had ~ 29% of my portfolio in Solarwinds. Even though my net gain was only 1.02%, the annualized return (based on the cash hitting my account by 2/10) will be ~21%. The odds was simply so much in my favor after they placed the loan offering, I just could not resist. In this case I was picking up pennies in front of a stalled steam roller.

Monday, February 01, 2016

January 2016 Performance

Let’s just say that I’m glad January has come and gone… I entered January fairly cautious so my downside was limited. The only real significant arb plays I put on were Dyax and Solarwinds (Ticker: SWI). As you know Dyax just closed and Solarwinds should be completing their merger any day now. I believe I lucked out a bit with Solarwinds as they were able to market their loan just as the junk window closed. I’m staying away from any merger plays associated with private equity at this point. I view the risk is high with a potential private equity deal breaking due to financing failure.

The only long position that is surviving this market decline is Constellation Brands (Ticker: STZ). The strength of this stock really amazes me. I can see this one take off to the races once the market settles down a bit. As I mentioned many times before, I’m going to hold Constellation Brands for a long long time…

Hoping February will be a nicer month…


2016 Performance Year to Date = -5.47% with the running monthly returns as follows:

January -5.47%

Friday, January 15, 2016

Sold Dyax and More Solarwinds

I sold my position in Dyax (Ticker: DYAX) today at $38.18. It was just too good for me to pass up at this point. I essentially sold the CVR for $0.88. The CVRs have a potential payout of $4.00 in ~ 3 years. My net gain in Dyax was 2.31% with an annualized return of 27.44%. I still have a ton of Short Puts in Dyax, which hopefully will expire worthless. I used the funds from Dyax to add to my position in Solarwinds (Ticker: SWI) at prices ranging from $58.58 to $58.68 (buyout price is $60.10 in cash). I currently have a ~ 12% position in Solarwinds. I believe Solarwinds should not have too much trouble raising the funds to complete the private equity buyout. This deal should close early next month.

Tuesday, January 12, 2016

Sold Baxalta and Added Solarwinds

I sold my Baxalta (Ticker: BXLT) position today at $39.99 and just broke even once again on the trade. This trade just didn’t work out as there was no surprises when Shire finally announced the deal. Also the potential tax issue still lingers.

In the place of Baxalta I picked up some Solarwinds (Ticker: SWI) at $58.81 (~4.5% position), which is being acquired by the private equity firms: Silver Lake and Thomas Bravo for $60.10 in cash. The only remaining hurdle to closing the deal is to raise $1.5 billion. The lender meetings are being held this week with the goal of getting this deal wrapped up in the first week of February. I’m modeling a close by February 12, which works out to a potential net gain of 2.12% (~23% annualized).

Thursday, January 07, 2016

Constellation Brands Report Card

The way this market is acting, I need some booze and a lot of it! Constellation Brands (Ticker: STZ) definitely delivered this morning with a nice beat and guided higher for the year. The company also announced its plan to build a new manufacturing plant in Mexicali, Mexico to meet the strong demand for their Mexican beer. I didn’t anticipate another new manufacturing plant this soon as I thought the current plant expansion was sufficient to meet the demand. And don’t forget their premium wine biz, which is also doing well. So with all the gloom and doom out there, this booze company is delivering in a big way…

Portfolio Holding

Based on some feedback, I’ve enclosed the % holding of my portfolio. I usually don’t go into this detail, but I believe this exercise will help me to take a more macro view of my portfolio position. The % holding is based on my conviction. Constellation Brands (Ticker: STZ) remains as my largest holding as I continue to see a nice runway for growth. Dyax (Ticker: DYAX) is up there as my second largest purely based as an arb play for the CVRs. And rounding out my top three position is Visa (Ticker: V), which I acquired during the IPO. I view Constellation Brands and Visa as long term buy & hold positions. It’s difficult to properly value the Safeway CVRs and the short puts so I placed a zero value on those positions. So I hope this was helpful…

Monday, January 04, 2016

Back in Baxtala

What a start to the new year… I’m back in Baxtala (Ticker: BXLT) (~ 4% position) at $39.98. With news out over the weekend on advanced merger discussions with Shire (Ticker: SHPG), I would have thought that Baxtala would be up more than it is right now. I sold my position in Regeneron (Ticker: REGN) (generating a net gain of 2.22%) to raise some cash for the Baxtala purchase. In this environment, it’s nice to have some merger arb plays to buffer the market volatility.

Saturday, January 02, 2016

2015 Performance

As 2015 came to a close, I reflected on what I would have done differently and the answer was really nothing. I learned to be more patient and let the event driven positions play out. In the previous years, there were many instances where I closed out the position before letting the event come to its conclusion. I was also more disciplined in pursuing more late stage merger plays instead of speculating with the early ones.

I was able to squeak out a gain of 0.64% for December and this was primarily attributed to the closing of several arb plays (Integrated Silicon Solution, WuXi Pharmatech and Altera). For the year, I managed to generate a gain of 33.48%, which was primarily attributed to the special situation plays and my holding in Constellation Brands (Ticker: STZ), which currently makes up ~ 20% of my portfolio. Constellation Brands was a strong performer by generating a gain of ~45% for the year. The following also contributed positively to the portfolio: Qiagen (Ticker: QGEN) ~ +17%, Visa (Ticker: V) ~ +18%, MasterCard (Ticker: MA) ~ +13% and Vertex Pharmaceuticals (Ticker: VRTX) ~ +6%.

Not all was well as a couple of the long positions declined for the year. Apple (Ticker: AAPL) declined ~ 4% (my third largest position) and Sanofi (Ticker: SNY) declined ~ 7%. I have no intentions of liquidating Apple or Sanofi as they present good value at the current prices.

I also initiated some new positions such as Lindblad Expeditions (Ticker: LIND) and Regeneron (Ticker: REGN), which have performed reasonably well so far.

So in summary, 2015 was a great year if you were into special situations / merger arb. I do think that we’ve probably seen the peak for M&A, but there will always be opportunities to take advantage of. In terms of strategy, I’ll continue to do what I’ve been doing for the last couple of years. I’m hoping that I can surprise myself with another strong year like 2015, but we’ll see. I just take it one day at a time…

So that’s a wrap for 2015 and onto 2016!

2015 Performance Year to Date = +33.48% with the running monthly returns as follows:

January +3.4%
February +7.03%
March -0.33%
April +0.39%
May +5.59%
June -1.2%
July +5.48%
August -0.89%
September -4.89%
October +12.90%
November +2.28%
December +0.64%

Annual performance for the past four years is as follows:

2012 +61%
2013 +44.61%
2014 +29.47%
2015 +33.48%