InflaRx Downgrade?

Huh? SVB Leerink cuts the price target of InflaRx N.V. (Ticker: IFRX) from $67 to $4 because of the poor results from the phase IIb trial for chronic inflammatory skin disorder. The stock is currently trading down ~90% at ~ $3.20 (closed at $37.29 day before). What a gutsy move to downgrade after the clinical results! Seriously!? There are very few analysts, who are good at their job. Majority just follow the herd mentality. That’s why I seldom pay any attention to the analysts calls.

May 2019 Performance

May ended with a big thump as President Trump threatened to impose tariffs on Mexican imports to the US if it cannot control the influx of people crossing the border. This obviously affected one of my larger holdings, Constellation Brands (Ticker: STZ). I do believe calmer heads will eventually prevail and the tariffs will not be enacted. This clearly creates more uncertainty in the market. How can you put money to work in this market when the administration can change the rules in an instant? Really frustrating for investors…

As the previous month, I have no arb / special situations plays right now. Just sitting tight with my long positions (same as previous months) and some cash.

I know, this is a real short post, but there’s really nothing more the add.

2019 Performance = +16.49% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%
April +7.15%
May -7.90%

April 2019 Performance

I don’t know, but I continue to be very cautious with this market. April was another strong month with a gain of 7.15% with Constellation Brands (Ticker: STZ) doing the heavy lifting. Constellation is finally coming back after a nice earnings report. My other long positions: Apple (Ticker: AAPL), Alibaba (Ticker: BABA), Mastercard (Ticker: MA) and Visa (Ticker: V) performed well in April. I’m pleased so far with the portfolio performance considering I’ve been holding ~ 15% cash.

I currently have no merger arb positions. I closed out my position in Spark Therapeutics (Ticker: ONCE). I was heavy in Short Puts (not an All-In situation, but a decent size position) and long common. I was fortunate to close out a big chunk of my position on 4/2, the day before the second pull and refile.  Sometimes, you just have to go with your gut feeling and this was the case for me. I still can’t believe the FTC is scrutinizing this deal so closely.

So pretty much the same as the previous months. Just hanging onto the long positions with some cash on the sidelines to take advantage of special situation / merger arb plays that may pop up.

2019 Performance = +25.37% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%

April +7.15%

March 2019 Performance

The strength of this market continues to amaze me. The market just takes bad news in stride and just climb a wall of worry. I really did nothing for March other than dabble with a small special situation trade with Eli Lilly’s (Ticker: LLY) spin off of Elanco (Ticker: ELAN). The portfolio was able to generate a positive gain of 5.06% for the month.

In the merger arb space, I’m still playing Sparks Therapeutics (Ticker: ONCE) via Short Puts and looking for a resolution this week. If all goes well with the antitrust review, this tender offer could possibly close this week. I still cannot see any antitrust issues with Roche’s (Ticker: RHHBY) acquisition of Sparks Therapeutics.

The other big news this week is Constellation Brands (Ticker: STZ) earnings release on Thursday. The stock sold off on the last earnings report due to weakness in the low end wine segment. Maybe they will announce the divestiture of their low end wine portfolio with this earnings report. I continue to like this company based on the anticipated free cash flow.

That’s all I have to report…

2019 Performance = +17.00% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%

February 2019 Performance

I was able to squeak out a gain in February despite the negative performance in Constellation Brands, which is the second largest position in the portfolio. Investors didn’t like what they heard with Constellation Brands (Ticker: STZ) at the CAGNY conference and sold off the stock. I didn’t hear anything concerning with Constellation Brands during the CAGNY conference other than a slight down tick in beer growth, which is expected. I like the fact they are focusing on returning ~ $4.5 billion to investors through share buy backs and dividends over the next 3 years. Constellation Brands is a money making machine with significant upside if Canopy Growth works out.

In terms of the merger arb game, I’ve been building a position (long common and short puts) in Spark Therapeutics (Ticker: ONCE), which is being acquired by Roche (Ticker: RHHBY) for $114.50 in cash via a tender offer. This deal should close in early April. I see no antitrust issues so this one should be smooth sailing with a closing within ~ 45 days of announcement.

The way the market is rocketing up, I just hope I can keep pace. I’m not going to chase anything, but just continue to focus on high probability arb plays and let my growth stocks do their thing.

2019 Performance = +11.37% with the running monthly returns as follows:

January +7.4%

February +3.7%

January 2019 Performance

January started out as a bust for me, but for some reason or another came back nicely to finish off the month. The month started with the Apple earnings warning, which was the shot heard around the world. Then a few days later, Constellation Brands reported disappointing earnings and guidance, which sank the stock. I have decent positions in both of these stocks so I definitely felt the pain. I actually added to the Constellation Brands position during the selloff. Sometimes, it’s best to buy when you feel sick to your stomach. In any case, both Apple and Constellation Brands ended up nicely for January. All my other long positions (Alibaba, Mastercard, Qiagen and Visa) performed well in January. Sanofi was the only negative performer.

I’m currently involved in two arb plays: Tesaro and Loxo Oncology. Tesaro was acquired by GlaxoSmithKline for $75 per share in cash. I played this via long stock and short puts. Tesaro recently closed and the short put options were accelerated to February expiration. I also played Loxo Oncology, which is being acquired by Eli Lilly for $135 per share in cash via short puts and this is moving smoothly toward a mid-February close. I was fairly aggressive in both of these merger plays because they were both structured as tender offers and did not anticipate any antitrust issues, which equates to a fast closing.

I have to learn to just sit tight and wait for the right opportunities to show up. Last year, I found myself forcing some bad trades because I felt I had to be in the market.This game is a constant learning experience...

2019 Performance = +7.4% with the running monthly returns as follows:

January +7.4%

Tesaro: All Antitrust Approvals Received

All of the required antitrust approvals have been received. This deal is pretty much a done…

From today’s filing: "On January 16, 2019, the FCO issued a clearance decision with respect to the Offer and the Merger, and the FCA provided a (declaratory) confirmation of clearance with respect to the Offer and the Merger. Accordingly, the portion of the Offer Conditions relating to approval by the FCO and the FCA of the transactions contemplated by the Merger Agreement has been satisfied."