September 2017 Performance

September was a bit challenging as many of the growth stocks in my portfolio generated flat to negative returns. One of my larger positions is Apple (Ticker: AAPL), which was down ~6% and other large positions such as Constellation Brands (Ticker: STZ) was down slightly and Visa (Ticker: V) was only a slight positive. The growth stock portion of my portfolio was a big drag this month.

What saved the month was the merger arb play in Kite Pharma (Ticker: KITE), which is being acquired by Gilead (Ticker: GILD). I pretty much went all in via short Puts and this deal is on track to be completed next week. I really liked this deal as it was structured as a tender offer, which equates to a quick regulatory review and close. I also generated some small gains in Rockwell Collins (Ticker: COL) and Alere (Ticker: ALR). It’s nice to see the special situation / merger arb activity picking up.

I continue to be very cautious in this market environment, but will aggressively pounce on high probability merger arb / special situation plays.

2017 Performance Year to date = +33.72% with the running monthly returns as follows:

January -4.50%
February +10.18%
March +5.1%
April +4.34%
May +5.67%
June +1.34%
July + 2.76%
August + 4.81%
September + 0.48%

Rockwell Collins & Kite Pharma Update

I sold my shares in Rockwell Collins (Ticker: COL) this morning generating a net gain of ~1.5% over a 7 day period. The equity component of this transaction was higher than what I had expected. I didn’t want to hang around to the end with this one.

Gilead’s (Ticker: GILD) transaction of Kite Pharma (Ticker: KITE) appears to be ahead of schedule. Gilead commenced the tender offer today with the tender expiring on October 2^nd. I sold some more Puts today.

August 2017 Performance

All in all, the portfolio generated a net gain of 4.81% for the month. The positive result for August was primarily attributed to Apple (Ticker: AAPL) and Alibaba (Ticker: BABA), which both gained over 10% for the month. My other positions: Constellation Brands (Ticker: STZ), MasterCard (Ticker: MA), Visa (Ticker: V) and Sanofi (Ticker: SNY) gained between 3 to 4% for the month. The only loser was Qiagen (Ticker: QGEN), which generated a loss of ~ 2% for the month. I also generated some small gains in the following merger arb plays: Scripps Network Interactive (Ticker: SNI) and MRV Communications (Ticker: MRVC).

I did enter two special situation plays recently: Rockwell Collins (Ticker: COL) and Kite Pharma (Ticker: KITE). Rockwell Collins is currently being targeted by United Technologies (Ticker: UTX) with a rumored price around $140. I have ~ 9.5% position in this play and looking to a definitive agreement soon. Kite Pharma agreed to be acquired by Gilead Sciences (Ticker: GILD) for $180 per share in cash. This deal is structured as a tender offer with a potential close in the second week of October. I am playing the Kite Pharma deal via short long dated Puts.

I continue to be on the defensive with a cash cushion. I start to worry when individual investors start piling into the market as observed in the new account openings at discount brokerages. And the fact that I am doing this well is a big warning signal!

2017 Performance Year to date = +33.08% with the running monthly returns as follows:

January -4.50%
February +10.18%
March +5.1%
April +4.34%
May +5.67%
June +1.34%
July + 2.76%

August + 4.81%

Bought MRV Communications, Inc.

I initiated a position (~7.4% position) in MRV Communications, Inc. (Ticker: MRVC) at $9.95. MRV Communications is being acquired by a German company, ADVA Optical Networking SE for $10.00 in cash. This deal is being structured as tender offer with the tender expiring on 08/11/17. I am modeling that this deal closes on 08/11/17 with the cash hitting the account by 08/18/17. This would generate a net gain of 0.50% (~10.6% annualized return).

July 2017 Performance

July turned out to be decent month with Constellation Brands (Ticker: STZ) and Visa (Ticker: V) marching to new highs following their strong earnings reports. I also received a nice dividend payout from the Syngenta acquisition.

I continue to be very cautious with the merger arb / special situation plays. I did manage to execute several small merger arb / special situation trades this month: (1) Panera Bread – I would call this a wussy arb trade as the annualized return was only in the mid-single digits. I bought some common and sold the out of the money calls. This was a super safe deal. (2) Alere – I sold some out of the money puts. I recently closed out the position with a small gain. (3) I traded around Scripps Network Interactive. The gains were modest as I did not go in big. I’m always a bit leery with stock + cash deals.

So that really sums up the month of July. Yes, it was another dull and boring month with very few trades. Sometimes it’s good to just sit still and wait for opportunities to show up…

2017 Performance Year to date = +26.95% with the running monthly returns as follows:

January -4.50%
February +10.18%
March +5.1%
April +4.34%
May +5.67%
June +1.34%
July + 2.76%

Sold Scripps Network Interactive

I sold my position in Scripps Network Interactive (Ticker: SNI) today at $83 generating a net gain of 1.99%. I don’t see a big premium from here if it’s an all cash bid from Viacom (Ticker: VIAB). I'm just playing things conservatively in this market environment.

Bought Scripps Network Interactive

I’m bit late to the table, but I took a small stab at Scripps Network Interactive (Ticker: SNI) today at $81.38 (6% position). It looks more and more likely that Discovery Communications (Ticker: DISCA) will come out as the winning bidder for Scripps Network (Ticker: SNI). There’s probably not much of a premium at the current price, but I believe there’s still some money to be made. We’ll see next week if Viacom (Ticker: VIAB) or Discovery Communications emerges as the winning bidder…