Wednesday, April 01, 2015

March 2015 Performance

It’s been a challenging month with the market volatility. Overall my portfolio held up relatively well with a loss of 0.33% for the month.

So what worked and didn’t work? I took a stab at a pre deal play with LifeTime Fitness (Ticker: LTM). The Wall Street Journal was all over LifeTime Fitness and I liked the odds of a deal occurring. I continued to play Salix Pharmaceuticals (Ticker: SLXP) via short Puts and this deal just closed today. Finally, I did some bottom fishing with Veeva Systems (Ticker: VEEV) by catching a falling knife and managed to have all of my fingers still intact.

And now what didn’t work… Vertex Pharmaceuticals (Ticker: VRTX) slumped a bit on so so results from their clinical trial for Cystic Fibrosis. Gilead Sciences (Ticker: GILD) also continued to decline on concerns of continued competition for their Hepatitis C drug.

I’m fairy cautious right now and have actually raised some cash. Still searching for some good special situations / arb plays.

2015 Performance Year to Date = +10.30% with the running monthly returns as follows:

January +3.4%
February +7.03%
March -0.33%

Saturday, February 28, 2015

February 2015 Performance

February turned out to be another strong month. I was able to generate a net gain of 7.03%, which I certainly was not expecting. The majority of this gain was attributed to my holdings in Apple (Ticker: AAPL), VISA (Ticker: V), MasterCard (Ticker: MA), Constellation Brands (Ticker: STZ) and even Qiagen (Ticker: QGEN). These are my long term holdings, which I pretty much leave alone.

I have entered into a short Put position in Salix Pharmaceutical (Ticker: SLXP) and Valeant (Ticker: VRX) with the expectation that Valeant completes the acquisition of Salix shortly. I really like Valeant (with Michael Pearson as one of the best CEO's around) and entered a short Put with a shot at getting some shares at an attractive price. Other than that my only other merger arb / special situation positions are a short Put in Hospira (Ticker: HSP) and the Casa Ley CVRs. I’ll probably add to the Hospira position, but I want to get a good feel on the regulatory review before making my move.

I usually don’t go for the high flyers, but I did initiate a position in Habit Restaurant (Ticker: HABT). I just see a huge run way for this company to expand throughout the country. I’m looking at holding Habit for many years. As they say, time will tell…

2015 Performance Year to Date = +10.43% with the running monthly returns as follows:

January +3.4%
February +7.03%

Thursday, February 26, 2015

Sold Boston Beer

Investing is all about being objective and not letting your emotions take control of the situation. Yesterday, I sold a small position in Boston Beer (Ticker: SAM) in my retirement account because of its revenue short fall. Even though I still generated a small gain of ~ 13%, the paper gain was obviously much higher at one point. I enjoy their product (Angry Orchard) and was planning to hold for a while, but fundamentally it was a really bad quarter and they had to guide down for 2015. I listened in on the earnings call and I didn’t like what I heard as the company was facing more competition, decreasing market share (Angry Orchard), slowing growth, higher transportation costs, etc… Also this stock was selling at a high valuation. This was in contrast to Constellation Brands (Ticker: STZ), which was and is firing on all cylinders with its beer biz. Constellation Brands has had a great run and continues to be my largest holding.

Friday, February 20, 2015

Sold Salix Pharmaceuticals

I took my profits in Salix Pharmaceuticals (Ticker: SLXP) today @ $156.28 on talk that Valeant (Ticker: VRX) was close to making an offer. I was able to generate a net gain of 2.30% over 4 day period. This was a speculative gamble on my part. It was time to take a quick profit and move on. The merger arb space is fairly quiet right now so just need to be patient so a nice opportunity shows up.

Wednesday, February 18, 2015

A Little Salix Pharmaceuticals

Yesterday, I picked up a few shares (~ 5% position) in Salix Pharmaceuticals (Ticker: SLXP) at $152.77. So far we know there are at least three potential acquirers: Valeant (Ticker: VRX), Shire (Ticker: SHPG) and Endo (Ticker: ENDP). I view the likelihood of a deal as high and so far all signs are pointing to Valeant as the likely acquirer. I can see a 10% premium from the current price. This is a pure speculative play on my part so we’ll see…

Monday, February 09, 2015

Hospira Arb Play

Not much action in the special situations / merger arb space… I initiated a position in Hospira (Ticker: HSP), which is being acquired by Pfizer (Ticker: PFE) for $90.00 in cash. I’m playing this deal via Short Puts. I sold the August 2015 $80 Puts at an average price of $1.00. The companies anticipate the deal closing in the second half of this year. It too early to narrow down the closing time frame, but I don’t see any anti-trust concerns. Pfizer is essentially buying a specialized generic drug company. So for the moment, this is the only merger arb play in my portfolio (besides the Casa Ley CVR received from Safeway deal).

Sunday, February 01, 2015

January 2015 Performance

The market volatility continues into 2015, which really shouldn’t be a surprise… January turned out ok for my portfolio. I was able to generate a net gain of +3.4%, which can be attributed to the closing of the merger arb play in Cubist Pharmaceuticals. The strong earnings performance of my largest holdings: Constellation Brands (Ticker: STZ) and Apple (Ticker: AAPl) also helped. Everything kind of clicked in January, but I would not expect this kind of performance going forward. It’s not often that I will find such a compelling merger arb play such as Cubist Pharmaceuticals.

Thanks to my readers for reminding me about the Safeway CVRs! I was playing Safeway via short Puts and did not pay much attention to the potential CVR payout. I bought a bunch of Safeway last Thursday at an average price of ~$35.16. With the anticipated cash payout of $34.92, I will be getting the Casa Ley CVRs for ~ $0.237. The company has stated that the fair market value of the Casa Ley CVR is $1.0149. That’s a potential ~ 300% gain if they are able to sell Casa Ley at the fair market value. The downside is that they have up to 3 years to sell Casa Ley so I’ll need to be a bit patient. The plus side is that there is a significant margin of safety and of course a nice potential payout.

I have a few merger arb plays on my radar, but still doing some work on them. That’s it for now…

2015 Performance Year to Date = +3.4% with the running monthly returns as follows:

January +3.4%