2019 Year End Review

I was expecting 2019 to a be flattish to down year based on the market action in the end of 2018. I maintained a conservative stance with ~ 15% cash through the year. I did not expect to generate a ~ 40% return in 2019. It was a buy and hold year with no changes to my holdings. I did take advantage of some merger arb plays, which contributed to ~ 6.25% of the total returns. I was able to generate some alpha from the merger arb plays. All in all, I was very pleased with this performance and hopefully I can continue to generate positive returns in the future.

So, what worked in the long portfolio… Apple (Ticker: AAPL), Alibaba (Ticker: BABA), Mastercard (Ticker: MA) and Visa (Ticker: V) generated market beating performance. Apple’s performance just blew me away, which was a nice surprise. The laggards in my portfolio were Qiagen (Ticker: QGEN), Sanofi (Ticker: SNY) and Constellation Brands (Ticker: STZ). Hopefully, these laggards will make a comeback in the new year. I currently have no plans to make any changes to this portfolio.

Moving onto the merger arb space. There were just three arb plays that contributed to most of the returns in this space. The companies were Loxo Oncology, Spark Therapeutics and Tesaro. Tesaro was the biggest contributor and got me in a big bind. I went big in Tesaro with common and short Puts. After building my position in Tesaro, my broker suddenly decided that my position was too much of risk for them and had reached the “Point of No Return”. I had to close out a bunch of the options positions at the last minute, which cost me some $$$. I was not pleased as they waited awhile before issuing this margin call (long after building up the position). So maybe time to look for a new broker in the new year.

In 2020, I’ll continue to maintain this conservative tilt with a cash position of ~15%. I don’t see much value in this market except for the energy sector. I’ve always been intrigued with the oil services sector as you are starting to see some going bankrupt. Maybe a good time to nibble on some of the potential survivors. I don’t care what people say, but we’ll always need oil.

I guess that is it for my 2019 review. It’s boring as not many trades were executed. Hopefully, I’ll come up with some profitable ideas in 2020.

As always… Have a Healthy and Prosperous New Year!

2019 Performance = +40.17% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%
April +7.15%
May -7.90%
June +8.2%
July +1.53%
August +1.88%
September +1.00%
October +1.12%
November +4.75%
December +2.9%

Annual performance for the past eight years is as follows:

2012 +61%
2013 +44.61%
2014 +29.47%
2015 +33.48%
2016 +14.61%
2017 +42.12%
2018 -4.11%
2019 +40.17%

CAGR from 2012 to 2019 = 31.26%

Qiagen Is Not For Sale

Not for Sale! What a nice Christmas gift from Qiagen’s (Ticker: QGEN) Board of Directors… For me it was a mixed blessing as part of me didn’t want this company sold. I got into this stock when it went public in 1996 and has been a multibagger for me. I’ll continue to hang onto to this position (makes up ~ 5% of my portfolio) for the long term. This company will continue to do well as we’re really at the cusp of the molecular diagnostics wave. This certainly was a wild ride as I really thought that the company would sell out to Thermo Fisher Scientific (Ticker: TMO). I guess they were looking for a big premium, which I can’t blame them.

Bought Some: The Medicines Company

I’m just doing some very low risk arb trades now as we limp towards the close of the year. I nibbled on some The Medicines Company (Ticker: MDCO), which is being acquired by Novartis (Ticker: NVS) for $85.00 per share in cash. This deal has already received FTC approval, so risk of this deal breaking is minuscule. I acquired the common stock at $84.70, which will equate to a net gain of 0.3590% or annualized return of 6.80% (assuming cash hits the account by January 10th). This is ~ 15% position. I figure this is better than the rate I am earning in my money market account.

Back Into Spark Therapeutics

Today, Roche (Ticker: RHHBY) received approval for its acquisition of Spark Therapeutics (Ticker: ONCE) from Britain’s Competition and Markets Authority (CMA). This was the catalysts I was looking for… I went back into Sparks today via common stock at an average price of $113.68 comprising of ~ 40% of my portfolio. I like the risk and reward at this point as the FTC was working close with Britain’s CMA during the review process. I’m modeling a year end close, which equates to a potential ~ 16% annualized rate of return. Not bad considering this is close to the finish line.

November 2019 Performance

November was a strong month with the market hit new highs. My portfolio just went along with for the ride. One interesting stock was Qiagen (Ticker: QGEN), which went from a dog performer to a rising star. As you may know, Qiagen pre-announced an earnings warning and CEO departure, which led to the stock hitting new lows. With the company in limbo, several acquirers approached the company with a potential deal. This in turn has propelled the stock to new highs. What a turnaround in stock price! I do think a deal will be announced shortly and I am looking for something in $50+ per share. Thermo (Ticker: TMO) will most likely win the prize.

I positioned my portfolio with a bearish tilt in 2019 with a hefty cash position, which I never got to deploy (yet). I am really surprised that my portfolio was able to generate these returns. I wish I can say it was skill, but luck is definitely a factor. My special situations plays were limited to a few positions in the beginning of the year. Nothing else since… So no significant alpha contribution to the portfolio. 

We’ll see if I can end the year on a strong note…

2019 Performance = +36.05% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%
April +7.15%
May -7.90%
June +8.2%
July +1.88%
August +1.00%
September -0.09%
October +1.12%
November +4.75%

October 2019 Performance

Surprisingly my portfolio held up relatively well in October with a gain of ~ 1.12% despite the earnings disappointments from Constellation Brands (Ticker: STZ) and Qiagen (Ticker: QGEN). Constellation Brands actually delivered a decent report, but the street did not like the growing losses with their stake in Canopy Growth (Ticker: CGC). And Qiagen warned of slower growth in China… I’ve held this one since it’s the IPO in 1996. I can’t seem to part with this one…

What saved me was Apple’s (Ticker: AAPL) earnings report. Still amazes me how this company can generate this type of numbers. I do constantly debate with myself as to whether to hold or sell the Apple position. The law of large numbers will eventually catch up to Apple and other mega cap tech companies.

I’m still looking around the special situations space. Spark Therapeutics (Ticker: ONCE) is starting to look interesting again. Looks like FTC will likely approve. Now just weighing the odds of an in depth UK investigation.

Oh of course I forgot to mention… I did not execute any trades in October.

2019 Performance = +29.88% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%
April +7.15%
May -7.90%
June +8.2%
July +1.88%

August +1.00%

September -0.09%

October +1.12%

September 2019 Performance

Just like a broken record… Another dull and boring month. I ended September flat with a slight loss of 0.09%. No trades were generated this month as I saw no compelling opportunities. It’s times like these where my patience is tested.

The big news for me will be Constellation Brands (Ticker: STZ) earnings report this Thursday. It should be a decent report as their beer biz continues to perform well. They should be initiating their plan of returning cash to their shareholders via stock buyback and dividend increases.  

No compelling risk arb plays right now. I think Spark Therapeutics (Ticker: ONCE) taught me a lesson where there are no safe plays out there anymore. I’m just glad that I was able to get out the position early on.

So, we now enter the home stretch with the final quarter of the year…

2019 Performance = +28.45% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%
April +7.15%
May -7.90%
June +8.2%
July +1.88%

August +1.00%

September -0.09%