Tuesday, April 18, 2017

Sold Actelion Pharmaceuticals

I decided to close out my position in Actelion Pharmaceuticals (Ticker: ALIOY) at $70.63 generating a net gain of 13.38% (~59% annualized). As the closing is fast approaching, I couldn’t get any clear answer from the ADR sponsor as to what would happen to the untendered ADRs. I didn’t want to be stuck in limbo as this was a relatively large position.

Now that Actelion is gone, my only remaining arb position is Syngenta (Ticker: SYT), which is looking likely to close next month. I’ve been adding to my Syngenta position by selling some Puts.

Wednesday, April 12, 2017

Sold Time and Akorn

I got stopped out of Time Inc. (Ticker: TIME) today generating a net loss of 5.03%. At this point, I view the risk return as not favorable as the potential take out premium may not much higher than the current price. Everything was looking positive last night with the Bloomberg piece until this morning with the Reuters report. Fortunately, Time Inc. was a relatively small position (~6%) so just a small bump in the road.

I also exited my position in Akorn, Inc. (Ticker: AKRX) generating a net gain of 2.58% (~5% position) so this offsets some of my loss in Time Inc.

April has been a positive month so far, but there’s still a lot of days left...

Sunday, April 02, 2017

March 2017 Performance

March turned out to be another decent month with a net gain of +5.1%. There wasn’t a single position that accounted for the gains, but it was rather small incremental increases from the various holdings. I increased my position in Syngenta (Ticker: SYT) to ~ 15% of my portfolio and initiated a position in Time Inc. (Ticker: TIME) (~ 6% position). My only other arb play is Actelion (Ticker: ALIOY), which is on track to close in Q2. I continue to play things conservatively for the time being as I patiently wait to pounce on a favorable risk reward merger arb / special situation play.

March update was brief as there was really not much to report on my part. Hopefully, I can report on some new ideas / positions in April…

2017 Performance Year to Date = +10.59% with the running monthly returns as follows:

January -4.50%
February +10.18%
March +5.1%

Saturday, March 04, 2017

February 2017 Performance

It’s nice to be in positive territory after a disastrous January. The largest contribution to the February performance was Wafergen Biosystems, which finally closed. Actelion and Ariad Pharmaceuticals were also positive contributors. I did sell my position in Kate Spade (Ticker: KATE) a bit too early, but overall I am pleased with how things turned out. I continued to add to my position in Actelion (Ticker: ALIOY). I also initiated a position in Syngenta (Ticker: SYT) and looking for that to close within the next few months.

Right now, my only merger arb plays are Actelion (~ 22% position) and Syngenta (~ 6% position).

Here’s a snap shot of my current holdings with their weighting:


 


2017 Performance Year to Date = +5.22% with the running monthly returns as follows:

January -4.50%
February +10.18%

Thursday, February 02, 2017

January 2017 Performance

January was a rough month due to my Rite-Aid position. I took another stab at it based on the news that closing was imminent, but now it looks like it will be an eternity before / if it ever closes. I bailed out of my position Rite-Aid (Ticker: RAD) position with a ~ 15% loss. The toughest part of trading / investing is being rationale about losses and just not hope a losing position will come back. Looking back it was the right decision as Walgreen (Ticker: WBA) came back with a cut in the buyout price. If I held on, my loss would have doubled to ~30%+. Obviously, the Rite-Aid position negatively impacted my January performance, resulting in a loss of ~ 4.50% for the month. Actually not bad, considering that I had a relatively large position in Rite-Aid and was down over 10% at one point. The Rite-Aid arb play is definitely one for the books…

I’m entering February with the following special situations / merger arb plays: Ariad Pharmaceuticals (Ticker: ARIA), Actelion (Ticker: ALIOY), Wafergen Biosystems (Ticker: WGBS), and Kate Spade (Ticker: KATE). (1) Ariad Pharmaceuticals – I’m playing this one via short Puts. I see this as a relatively low risk play as Takeda is acquiring the company via a tender offer. Takeda just received anti-trust approval for the deal and everything seems to be falling in place for the completion of the tender offer on February 15th. (2) Actelion – A large deal as J&J is acquiring Actelion for $280 in cash plus the R&D spinout. This deal is anticipated to close by the end of Q2. The price just took a little hit with French regulators recommending to physicians to stop prescribing Uptravi due to patient deaths. I like the risk reward here. (3) Wafergen Biosystems – The company should be announcing Q4 revenue numbers soon, which will determine the final buyout price. So it’s wait and see… Finally (4) Kate Spade – Potentially looking at several strategic acquirers, looking at a price in the low to mid 20’s.

I’m looking at better risk management as Rite-Aid demonstrated my weakness in this area. Looking forward in seeking out profitable special situation plays in the upcoming year...


2017 Performance Year to Date = -4.50% with the running monthly returns as follows:

January -4.50%

Monday, January 02, 2017

2016 Performance

It’s time to reflect on my performance for 2016. The year started off a bit weak, did well mid-way through the year and under performed as the year ended. My net gain for the year was 14.61%, which slightly beat the major indexes (S&P 500 = +11.96%, DOW = +13.42% and NASDAQ = +7.50%). I give myself a grade of a C for my 2016 performance. I executed some poor trades as the year ended, which adversely affected the performance results. I also see these as sloppy trades as I tried to generate additional returns, but did not totally consider the potential risks such as Tronc (Ticker: TRNC) and Rite-Aid (Ticker: RAD).

Overall the Special Situations / Merger Arb plays definitely helped my portfolio as my major long holdings essentially under performed the market. My three largest long holdings and the 2016 returns of each are as follows: Constellation Brands (Ticker: STZ) (+7.63%), Visa (Ticker: V) (+0.60%) and Apple (Ticker: AAPL) (+10%). I still plan on holding these for a while as they all generate substantial free cash flow, which in the long run should support higher stock prices.

I am entering the New Year with the following Special Situation / Merger Arb Plays: WaferGen Bio-systems (Ticker: WGBS) (~ 9% position), Actelion Pharmaceuticals (Ticker: ALIOY) (~14% position) and Kate Spade (Ticker: KATE) (~8% position). WaferGen is the most intriguing one as the takeout price is based on 2017 revenues and I anticipate hearing some preliminary Q4 numbers soon. Actelion looks like is has a good chance of getting taken out by J&J (Ticker: JNJ) or Sanofi (Ticker: SNY) so there will definitively be some news flow on this deal by the end of January. Finally, Kate Spade has put itself up for sale and I’m looking for a price in the low to mid 20’s.

Looking back at the past five years of performance results, I start to wonder when it would be a good time to transition a good chunk of my portfolio to an index strategy. At times, managing an active the portfolio can get quite hectic. For now, I still really enjoy actively managing my portfolio, but I can see myself transition to an index portfolio at some point. When? Maybe when I retire?

2016 Performance Year to Date = +14.61% with the running monthly returns as follows:

January -5.47%
February -3.50%
March +7.51%
April +0.84%
May +6.34%
June -2.6%
July +12.2%
August +6.57%
September +1.94%
October -5.49%
November -1.59%
December -1.3%

Annual performance for the past five years is as follows:

2012 +61%
2013 +44.61%
2014 +29.47%
2015 +33.48%
2016 +14.61%

Tuesday, December 20, 2016

Bought Rite-Aid

I took off my positions in Actelion (Ticker: ALIOY) (-7.18%) and Valspar (Ticker: VAL) (-0.74%) generating some small losses. These were not large positions (~4% in each), but Actelion essentially hit my loss limit and Valspar looks like it will take a bit longer to close (end of Q1). I did not like the risk profile when compared to Rite-Aid (Ticker: RAD), which just  announced the store divestiture to soothe the FTC’s concerns. I initiated a position in Rite-Aid (yes, once again!) at an average price of $8.60. This looks like it has a very good chance of closing by the extended merger end date of 1/27/17. The divestiture of the stores to Fred’s (Ticker: FRED) really de-risked this merger arb play in a big way. I am looking at a potential net gain of ~4.5% (~41% annualized assuming a close by 1/27). Yes, this is a large position…

I’ve learned that position sizing in relation to the potential risk is very important. Even though I took losses in Actelion and Valspar, they were relatively small... The Rite-Aid risk reward is just too good to pass up.