Thursday, November 12, 2015

Sold Cleco and More WuXi Pharmatech

I liquidated my position in Cleco (Ticker: CNL) today at $49.77 generating a net loss of 4.78%, which takes into account of the upcoming dividend payout. I try to limit any losses to ~ 5% and this one just about gets there. In this game, you have to minimize your losses to protect yourself. The price action has been horrible. I was wrong and I learn from my mistakes…

I added to my position in WuXi Pharmatech (Ticker: WX). The shareholder vote is scheduled for November 25th. This deal is anticipated to close 12 working days after the vote, which works out to December 12th according to my calculations. I’m modeling the cash hitting my account by December 18th, which is still a healthy ~ 20% annualized return at today’s prices.

Wednesday, November 04, 2015

Some Cleco Corporation

I initiated a position in Cleco Corporation (Ticker: CNL) today at an average price of $52.68 (~13% position). There is also an upcoming dividend payout of $0.40 with an ex-div date tomorrow. This utility company is being acquired for $55.37 in cash by an investor consortium made up of Macquarie Infrastructure, British Columbia Investment and John Hancock Financial. This deal is estimated to close in Q1 based on the final approval from the Louisiana Public Service Commission. Next week there will be an Administrative Law Judge hearing to review the commitments made by the company. There’s been some criticism by the public on this deal, but that is always the case with any public utility merger. Macquarie has plenty experience in acquiring public utilities and I believe they will offer the appropriate commitments that will appease the utility regulators. I am currently modeling a close by January 31, 2016, which will equate to a net gain of 5.85% including dividends (~24% annualized).

Tuesday, November 03, 2015

CFIUS Approval for ISSI and Some Dyax

Integrated Silicon Solution (Ticker: ISSI) finally received CFIUS approval so it’s pretty much smooth sailing to the closing now. I was modeling a close by next week, but the company is now guiding for December close pending regulatory approvals from Taiwan and China. These will be rubber stamp approvals at this point. I may just close out my position as there are many attractive merger arb plays out there right now.

Yesterday, I initiated a position in Dyax (Ticker: DYAX) (~5% position) at $35.57. This company is being acquired by Shire for $37.30 in cash plus a $4.00 CVR. There is a wide spread, which can probably be attributed to (1) a potential material adverse event for a drug still in development, (2) potential acquisition of the acquirer (Shire) and (3) anti-trust concerns. The Street is probably most concerned about anti-trust. With all of these factors, you get a merger arb play with added risks. I have to size this one appropriately given all the potential risks, but I can see myself going to a 10% position at some point.

Friday, October 30, 2015

October 2015 Performance

When I calculated my return for October, I thought I made a calculation error. Everything kind of clicked… The growth stocks and merger arb plays performed well. I’ll take it...

In terms of the growth stock portion of my portfolio, Constellation Brands (Ticker: STZ) once again delivered solid earnings and is trading near its highs. This is also my largest holding making up ~ 26% of my portfolio. Other companies such as Visa (Ticker: V) and MasterCard (Ticker: MA) have also performed well and are also at new highs. And don’t forget about the biotechs such as Vertex Pharmaceuticals (Ticker: VRTX) and Regeneron (Ticker: REGN), which made a nice little bounce from the recent biotech sell off.

The merger arb plays are holding steady gains. The only position that closed in October was Dealertrack. I was fortunate enough to get in the day before the regulators approved the deal. That was just plain luck! I also traded aggressively around some of the pre-merger plays such as Molson Coors (Ticker: TAP), SanDisk (Ticker: SNDK) and Maxim Integrated Products (Ticker: MXIM). My current merger arb portfolio is made up of the following: Altera (Ticker: ALTR), AirMedia (Ticker: AMCN), BioMed Realty Trust (Ticker: BMR), Integrated Silicon Solution (Ticker: ISSI), WuXi Pharmatech (Ticker: WX) and Rite Aid Pharmacy (Ticker: RAD).

I’ll be keeping a close eye on Integrated Silicon Solution next week (CFIUS decision due by November 2nd) and looking forward to the closing of WuXi Pharmatech sometime in December.

2015 Performance Year to Date = +29.68% 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%

Friday, October 23, 2015

Sold Some ISSI and AMCN

I sold some more Integrated Silicon Solution (Ticker: ISSI) today at $22.59 (net gain of 3.89% / 28.86% annualized) bringing down my position to ~ 7% of my portfolio. I’ll hold the remaining position through the CFIUS decision. It’s all about risk management… I don’t want a blow up in a security to vaporize my portfolio. I’ve experienced that once before and I never want to experience it again.

I also liquidated my position in AirMedia Group (Ticker: AMCN) today at $5.48 generating a small gain of 0.37%. It’s still early for this arb play so looking to re-enter at a lower price.

Thursday, October 22, 2015

Some Random Thoughts

I have a great deal of respect for most Research Analysts as it is not an easy job. But when I see a headline such as “SanDisk (Ticker: SNDK) stock price raised to $86.50 from $63 at Stifel Nicolaus”, I scratch my head. Is this really necessary? Just a waste of time to put this out and for someone to actually read this…

Ok, enough of my gripes!

What I actually wanted to write about is the dangers of shorting naked Puts. Back in February I sold some naked Puts (January 2016 $170) for $13.60 on Valeant (Ticker: VRX) after it agreed to acquire Salix. At that time, I thought the acquisition would help boost Valeant stock price and would be relatively easy money. Fortunately I closed out the position a few months later with a small gain, but I would be looking at a nice fat loss if I held onto the position. Those same Puts are currently trading with a bid of $77.50 / ask: $80.60. Another lesson on not to be too greedy…

Wednesday, October 21, 2015

Sold SanDisk

I sold my position in SanDisk (Ticker: SNDK) this morning at $78.33 on news that it is being acquired by Western Digital (Ticker: WDC). I was able to generate a net gain of 2.28% over a two day period. I had no intention to hold this one until closing. The companies are guiding for a Q3 2016 close, which is an eternity for a merger arb play. I did not find the annualized gain over this period to be attractive. It was time to move on...