Some Safeway

I took a stab at Safeway (Ticker: SWY) today by selling the January 2016 $37 Puts for $1.45 and pocketing the premium. There’s been a lot of chatter that Kroger (Ticker: KG) was going to jump into the mix and make a bid for Safeway, but the news out late today suggests that Cerebus is going to ink the deal for around $40. This looks like a done deal with a possible announcement tomorrow.

February Performance

Well February has come to a close rather quickly and once again it’s performance review time. February was a very quiet month for me as the only trade I executed was exiting the short Puts in RDA Microelectronics (Ticker: RDA). Right now, I have no open arb / special situation plays although I am looking to possibly get back into RDA Microelectronics. The portfolio performed well in February after a negative January. I generated a net return of 6.50% in February... ok I cheated a little bit. I participated in the employee stock purchase program and the lump sum purchase took place in January. I was able to purchase the company stock at a ~ 27% discount. Don’t ask… it’s a weird employee stock purchase program. If I ex out the gain from the employee stock purchase, my net return for February would be 5.36%.

What worked? Constellation Brands (Ticker: STZ), Biogen Idec (Ticker: BIIB), VISA (Ticker: V) and Vertex Pharmaceuticals (Ticker: VRTX) contributed positively for the month of February. There was really no negatives… maybe Apple, but overall I’m pleased with the February results.

Performance Year to Date = +5.83% with the running monthly returns as follows:

January -0.67%

February +6.50%

Closed Out RDA Microelectronics

I closed out my position in RDA Microelectronics (Ticker: RDA) today by buying back the Puts I sold. I bought back the June 2014 $17.50 Puts and the September 2014 $17.50 Puts for $0.10. These Puts were sold with an average price of $0.3109 from 12/30/13 through 1/16/14. It’s highly likely that this merger will close, but there has been controversy with the parent: Tsinghua Unigroup not obtaining the proper pre-approval from the NDRC in its acquisition of RDA Microelectronics. This should no longer be an issue since the PRC has announced changes in its outbound investment rules, but you never know. As the options saying goes: “when in doubt, close it out”.

January Performance

I raised some cash at the end of 2013 and entered 2014 rather conservatively. I’ve been pretty much 100% + invested during the past two years, but I am more cautious now. I ended the month of January down -0.67%. The earnings disappointment from Apple (Ticker: AAPL) and MasterCard (Ticker: MA) did not help. On the other hand the closing of Spreadtrum Communications and Viropharma contributed positively to the January results as well as the positive earnings report from Constellation Brands (Ticker: STZ). I know Spreadtrum Communications closed in December, but the Puts I sold expired in January so the gain was officially booked in 2014. The only arb position I have open now is RDA Microelectronics (Ticker: RDA), which is currently awaiting regulatory approval in the PRC. Now is not the time to get aggressive, but I do have my shopping list ready.

Viropharma = Done Deal

Today, Shire (Ticker: SHPG) announced that they are waiving the UK OFT (Office of Fair Trade) approval condition in order to close the acquisition of Viropharma (Ticker: VPHM). This decision was the final condition needed to close this deal. The UK OFT had until February 10^th to announce their decision. Shire will close this deal on January 24^th. I sold the Jan 2016 45 Puts on Viropharma so I will let those expire on February 21^st.

Sold Hilton Worldwide

I sold my tiny position in Hilton Worldwide Holdings, Inc. (Ticker: HLT) today at $21.76 generating a net gain of 8.8%. I received these shares though the IPO in December for $20 per share. This was just a small holding so it was either I sell the shares after 30 days or decide to start building up a larger position. I decided to sell my shares. I’m generally cautious about the private equity offerings as they generally cash out at the peak.

Constellation Brands - Very Good Numbers

A very nice quarter reported by Constellation Brands (Ticker: STZ) this morning. The company reported earnings per share of $1.10 and revenues of $1.44 billion, which easily beat the consensus estimates. I was particularly pleased to see the free cash flow estimates of $525 to $575 million for 2014. This stock should see a nice pop based of these results. I still like this stock and have no intentions of selling anytime soon. This holding currently makes up ~ 20% of my portfolio.