Tuesday, December 06, 2016

Sold Virgin America

I closed out my position in Virgin America (Ticker: VA) today at $55.75 after the wires reported that an agreement was imminent with Alaska Air (Ticker: ALK) and the DOJ. I was able to generate a net gain of 1.54% (~19.23% annualized return) with the position that was initiated on 11/08/16. This position was no longer attractive assuming a year end close. Now looking into other hairy arb plays…

Friday, December 02, 2016

November 2016 Performance

November was another difficult month for my portfolio as the Presidential election negatively affected several of my large holdings such as Constellation Brands and Visa resulting in a loss of 1.59% for November. Constellation Brands (Ticker: STZ) sold off because all of a sudden there will be less people drinking their Mexican beer and a tariff will be implemented for their imports. Umm… I think not, Constellation Brands will do just fine as their products are gaining market share everywhere in the US. I doubt any tariff will be implemented for beer manufactured in foreign countries. If this was the case, all of the major beer producers will be impacted and will lobby hard to ensure this does not happen. Just doesn’t make sense for the beer biz… it’s like forcing Anheuser Busch to manufacture Bud in Mexico and calling it an American beer.

It’s hard to give a rational explanation as to why Visa (Ticker: V) sold off, but it’s probably a risk on trade for the financials. Financials that take on the risk of lending will do well under this administration. I would say that Visa was a safe haven and investors sold to redeploy into more risky financial assets.

Both Constellation Brands and Visa are long term holds for me. I have no intention of selling any of these two for a long long time…

Now some merger arb plays, I’m still very heavy in Virgin America (Ticker: VA) and really hope this one gets wrapped up by year end. I initiated a position in Wafergen (Ticker: WGBS) (~ 9% position) after the shareholders approved the buyout from Takara Bio. The final buyout price of Wafergen will be determined once the annual revenues for 2016 have been finalized. The company should be able to easily do $9 million in revenues, which would equate to ~ $5.00 payout. Any additional revenues will equate to a higher payout to shareholders. The company is guiding $10 to $12 million for the year. I believe $10 million is very doable for this company.

Finally if anyone wants some lunch money, check out the WebMD Health (Ticker: WBMD). There is a tender offer for $55 with an odd lot priority (less than 100 shares). The tender expires on 12/15/16.

Performance Year to Date = +16.12% 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%

Tuesday, November 08, 2016

Bought Virgin America Again

I was premature in selling Virgin America (Ticker: VA) yesterday. After I sold news filtered out that there was a settlement in place with Alaska Air (Ticker: ALK) and the DOJ. Alaska Air is now working to resolve the Alioto ambulance chaser lawsuit. This merger arb play still presents a very nice risk reward opportunity. I re-entered my position this morning at an average price of $55.91. I’m still modeling a close by the end of November.

Monday, November 07, 2016

Sold Virgin America

It’s been challenging to say the least in the special situations / merger arb space. I decided to take off my position in Virgin America (Ticker: VA today generating a net gain of 2.54% (~45% annualized). I figure it’s time to de-risk and protect my gains for the year. I went in very aggressive in Virgin America as this made up ~ 60% of my portfolio. So any hiccups with this merger and I would essentially be vaporized. It’s time to take a step back and look for some better risk / reward opportunities.

Thursday, November 03, 2016

October 2016 Results

October was a very challenging month as Tronc (Ticker: TRNC, one of my special situation plays blew up. Gannett (Ticker: GCI walked away from a deal to acquire Tronc as the banks pulled their financing. This contributed to the majority of my loss in October. You try your best to avoid these blow ups, but they a bound to happen in the special situation / merger arb game. You simply have to not dwell on it too much and move on.

My current largest merger arb play is Virgin America (Ticker: VA and I am anticipating that the DOJ will hopefully approve this merger with Alaska Air (Ticker: ALK this month. I also have a small position in NXP Semiconductors (Ticker: NXPI, which has agreed to be acquired by Qualcomm (Ticker: QCOM for $110 in cash. That’s it for my current merger arb plays. I’m still keeping a close eye on LinkedIn (Ticker: LNKD and may initiate a position soon.    

Hopefully, I’ll redeem myself from the minor setback in October…

2016 Performance Year to Date = +18% 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%

Thursday, October 27, 2016

Sold Tronc

I took a hit in Tronc (Ticker: TRNC) today. I was expecting news this morning of a definitive agreement with Gannett (Ticker: GCI), but obviously it did not materialize. There was also news later in the day that banks pulled out of financing for this deal. It was the financing news that told me to cut my losses and move on. I generated a super -29.39% loss on this special situation play. I had ~ 16% position in Tronc so the overall impact was a ~ 5% draw down on my portfolio. I learn the most from my losses and this was one nice lesson.

Thursday, October 20, 2016

More Virgn America

I’ve been building a position in Virgin America (Ticker: VA) as my conviction grows in this deal closing. Virgin America is in the process of being acquired by Alaska Air (Ticker: ALK) for $57.00 in cash. This position currently makes up ~ 48% of my portfolio at an average price of $53.73. All of the body language from Alaska Air has been positive in this deal closing. Now, it’s a question of when and not if this deal closes. I have modeled a closing by November 30th. We should be hearing from the DOJ soon…