Back At It Again

I recently took a minor set back in Landry’s (Ticker: LNY) and Foundry Networks (Ticker: FDRY). When things like this happen, you just need to regroup and get back into the biz of trying to make some $$$. Today, I sold some Landry’s @ $12.50, which equates to a loss of 32.61%. I hate losses, but sometimes they are good since you learn what not to do next time around. Fortunately, I piled up a good amount of short term capital gains this year so this will off set some of that.

So far this year, defense related takeovers have been very good to me. I decided to give SI International (Ticker: SINT) a try today. I picked up a few shares at $28.68 with a buyout price of $32 by the English firm Serco Group PLC. The company is currently waiting word from the Committee on Foreign Investment in the United States (CFIUS). Today is the expiration day so we’ll know by Monday if the review will be extended. If it receives the ok, the deal should close in two weeks. A potential 11.57% return in two weeks, that’s a pretty good risk / reward ratio.

I’ll give a plug to The Deal.Com. This is where I get many of my arb ideas. They’ve been pretty much on the money.

Foundry Networks = Repriced Deal = Ouch!

My Foundry Networks (Ticker: FDRY) arb play won’t be paying off as I had hoped. Tonight, Brocade (Ticker: BRCD) re-priced the deal to $16.50 in cash from $18.50 in cash plus 0.0907 shares of Brocade stock. Brocade wasn't able to raise the additional $400 million. Oh well, you can’t win them all, but you just learn from this experience and move on.

Don't Try To Pick The Bottom

When will I learn that it’s a fool, who tries to pick a bottom? Today, I tried my luck with Las Vegas Sands (Ticker: LVS) and picked up a few shares at $8.65. I was trying to do a buy write with this purchase, but I was unable to get the option price I wanted. I just didn't have a good feeling after the purchase and ended up selling at break even at ~ $8.68. The stock closed at $8.21. I would never have though that this stock can go this low, but it keeps going lower and lower.

On the arb front Foundry Systems (Ticker: FDRY) reported good results today. This should give confidence to arb players that this merger with Brocade (Ticker: BRCD) is on track to close shortly. Tomorrow is the shareholder vote by Foundry Systems shareholders. Hopefully, there will be some news after the vote regarding the status of the merger. I picked up some more Foundry Systems today.

DRS Technologies = Done Deal

Today Finmeccanica, the Italian defense company, closed its acquisition of DRS Technologies (Ticker: DRS) for $81 in cash. This represents a 10.13% gain over a two week period. My remaining open arb plays are: Genentech (Ticker: DNA), Anheuser Bush (Ticker: BUD), Foundry Systems (Ticker: FDRY) and Landry’s (Ticker: LNY). The only dud so far is Landry’s, which has turned into a take under. I’ll be dumping that very soon, but fortunately it won’t hurt too much. Overall my arb plays have been very good to me so no complaints, but I know I will need to change my strategy as buyouts have come to a screeching halt.

GEHL Company = Done Deal

I cashed out of Gehl Company (Ticker: GEHL) today at $29.98, which equates to a 3.27% return over a four day period. The company announced their tender offer results this morning with the majority of the shareholders tendering their shares for the buyout price of $30 in cash. This is as close as you get to making free money. There was no reason for the spread to be so wide with the deal in the bag. The little guys definitely have the edge right now in the arb game. As I have said before, many of the arb funds are out of biz leading to a lot of inefficient pricings. Anyways, I picked up some more Foundry Networks (Ticker: FDRY) today at ~ $17.47 per share. The shareholder vote is later this week and looking at a possible close next week.

No, I haven’t stopped following biotech companies. Keep an eye on Genzyme (Ticker: GENZ); they’re meeting with the FDA today in hopes of receiving approval to manufacture Myozyme using a 2000L bioreactor. Also the company reports Q3 earnings tomorrow. This one will definitely move one way or another. My bet is up! Yes, I do have a position in Genzyme.

GEHL Another Arb play

This volatile market is providing so many opportunities to make $$$ in the arb game. I just wish I had more $$$ to invest in the arb plays. Today, I picked up some GEHL Co. (Ticker: GEHL) at $29.03. GEHL is being acquired by the French equipment maker Manitou for $30 in cash. The company received the German approval today and the company should wrap up the deal next week via the completion of the tender offer. This will be a quick 3.34% gain with minimal risk.

DRS Technologies... A Goooo...

Well, the only good news today is that DRS Technologies (Ticker: DRS) received approval from CFIUS. This deal should close at the end of next week with shareholders receiving $81 per share in cash.

Damn, I don’t know what I was thinking, but I accidentally closed out my covered call trade in Goldman Sachs (Ticker: GS) (the one with the November 95 strike price). I ended up with a 24% gain in this trade, but if I done nothing it was an easy 30% gain.

I picked up a bit more Foundry Systems (Ticker: FDRY) in another arb play. In this one, you’ll receive $18.50 in cash plus 0.09 shares of Brocade (Ticker: BRCD). This is one of the more solid deals with a good chunk of the financing already in place. This should close after the Foundry shareholder vote next week.

DRS Technologies... Go or No Go???

You can’t get too caught up with the markets ups and downs. You just have to focus on a strategy that’s working for you. I’m continuing with the arb strategy, which has been fairly good to me except for Landry’s (Ticker: LNY). On 10/14, I picked up some DRS Technologies Inc (Ticker: DRS) at $73.55, which is being acquired by Finmeccanica, an Italian company for $81 in cash. Today is the CFIUS (Committee on Foreign Investment in the US) deadline so we’ll tonight or tomorrow if it’s a go or no go.

TD Ameritrade... Sooo Disappointed

It was amazing this morning... TD Ameritrade was so messed up! First of all, TD Ameritrade was not accessible this morning and when I finally was able to log in, I was receiving incorrect pricing information. Oh, when I tried to speak with a live person... there were none. That’s totally unacceptable. I ended up executing some of my trades at Merrill Lynch.

Fat Options Premium in Goldman Sachs

Same old story, market down a couple hundred points… It’s gotten so ridiculous that people are actually joking and laughing here at the office when they check out the market. Anyways, my goal is to try to make some $$$ regardless of how the market is acting. I played around with GE today, but only made a tiny bit off that trade. One thing I did notice was the fat options premiums on Goldman Sachs. I basically did a buy / write today on some Goldman Sachs.

Trade 1: Bought Goldman @ $84.20 and sold the October 90 calls at $11.30. I’m looking at a gain of 20% if Goldman closes at or above $90 on October 17th. If not, I keep the $11.30 per share premium.

Trade 2: Bought Goldman @ $85.37 and sold the November 95 calls @ $16.10. This time, I’m looking at a gain of 30% if Goldman closes at or above $95 on November 14th. If not, I keep the $16.10 per share premium.

Oh, also picked up some Apple this morning @ $94.72. This company has over $20 in cash per share. I see good value in Apple.

No Bottom Yet

Every time you think it’s the bottom, the ditch seems to get bigger. I’m still doing some small trades here and there. I exited my position in Visa with a gain of 3.34%. You need plenty of ammunition on hand to take advantage of better opportunities. I added more Anheuser Bush as part of an arb play. I also initiated a position in Imclone Systems as another arb play. I did encounter one hiccup along the way; Landry’s Seafood got smacked up a bit in this credit mess. It doesn’t look like Landry’s will be bought out so it’s time to cut my losses on that one.

Enough Is Enough

In this type of market, you just have to step back and reflect a bit. I leave work everyday and observe the traffic jams, people rushing home from work, etc… People, the world is not coming to an end with this financial hiccup. The press makes it seem as though it’s Armageddon. I was reading the Wall Street Journal and there was an interesting quote in an article that caught my attention. It’s from an investor during the 1929 – 1932 market correction where the indexes fell 90%. Here’s the quote: “There’s a better chance to make money now than ever before.” This guy ended up making millions by buying all the way down. Yesterday I picked up a bunch of Financial Spiders and Visa. I felt sick to my stomach, but that was probably a good sign of a market bottom.

Market Reflection

This is a very difficult market… It’s hard to be a bull, but sooner or later psychology will change and everyone will be buying, but we’re not there yet. I’m still pretty much on the sidelines doing small trades. Today I sold Barclays PLC (Ticker: BCS) first thing in the morning @ $25.87 for a quick 3% gain (purchased on Wednesday @ $25.07), but it was just a tiny position. Really not even worth mentioning, but I post it so I can refer back to it.

The market is not ready to head back up yet. This morning I overhead a coworker saying that he just purchased some Blackberry stock (Ticker: RIMM). He was expecting the market to rally next week after the signing of the financial bail out package. This person is really a novice investor. After hearing that, my gut was telling me that the market will sell off on the news. Whatever the consensus is, the market generally does the opposite.

Photon Dynamics = Done Deal

Photon Dynamics (Ticker: PHTN) just filed with the SEC to delist their shares so the deal is done. I have to admit that I sweated it out a bit when there was no news right after the market close. Just for your curiosity here are the trades:

9/11 0.5X @ $13.70
9/12 0.5X @ $13.58
10/1 1X @ $15.40
10/1 1X @ $15.41
10/1 2X @ $15.42
10/1 1X @ $15.43
10/1 5X @ $15.44
10/1 1X @ $15.45
10/2 1X @ $15.40

Now I can relax a bit after this trade…

More Photon Dynamics

Like poker, it’s all about risk and reward. There are no guarantees, but you just have to go all in when the odds are heavily in your favor. That’s what I did with Photon Dynamics (Ticker: PHTN). There was still a spread of over 1% today and I took advantage of that by purchasing more shares at $15.40. This is expected to close today for $15.60 in cash per share. Many of the arb funds are out of biz and this has created a lot of inefficiencies in the small cap arb space. These opportunities don’t happen often so take it while you can.

Free Money In Photon Dynamics

It amazes me how inefficient this market can be. With one day left to closing for Photon Dynamics (Ticker: PHTN), the stock is trading around $15.41 that’s a spread of slightly more than 1%. Hellooo…!?!?!? The company issued a press release yesterday stating that they are closing tomorrow in which you will receive $15.60 in cash for each share. I backed up the truck into Photon Dynamics today with purchases from $15.40 to $15.45. I’ll take these types of returns any day.