Baseball

Back in Spreadtrum Communications

I have a feeling Spreadtrum Communications (Ticker: SPRD) is close to obtaining the required regulatory approvals in the PRC so the deal can close. I’m playing this by selling the January 2015 $30 Puts and collecting the premium. This is my only merger arb / special situations play at the moment. I don’t see anything interesting right now so I’ll just patiently wait for the right opportunity to show up.

Sold Rue21

I took a small profit in Rue21 (Ticker: RUE) today at $41.10 generating a net gain of 0.27% (13% annualized gain) over a 7 day period. The risk has significantly been reduced with the recent bond placement, but I didn’t want to push my luck here and ruin a good year. The downside is significant if this deal breaks (looking at a ~ 50% downside from these levels). I just don’t have that good fuzzy conviction feeling with this one so I’m out.

Sold Spectrum Communications

I decided to close out my position in Spreadtrum Communications (Ticker: SPRD) today at $30.40 generating a net gain of 1.80% over a ~ 70 day period (~9.30% annualized return). It’s not a great return, but I did use leverage so the return is actually higher (too lazy to calculate right now). It looks like this closing may take longer than what I had anticipated. According to the company, regulatory filings were made in late August for PRC approval. Going through the regulatory process is a slow process in China so I don’t anticipate anything soon, but I’ll continue to keep a close eye on this one.

Some Rue21

I picked up some Rue21 (Ticker: RUE) today at $40.98. I believe there’s a good chance that this deal closes soon at the buy out price of $42.00 by Apax Partners. Lots of skepticism surrounding this deal as the same store sales were / are trending down, which obviously spooked the bond buyers. It looks like the banks will be able to sell the paper at a steep discount to get this deal done. This position makes up ~ 8% of my portfolio. As I say, we’ll see soon...

Onyx Pharmaceuticals = Done Deal

Well that was quick… Amgen (Ticker: AMGN) closed its acquisition of Onyx Pharmaceuticals (Ticker: ONXX) today and the cash just hit my account. I generated a net gain of 8.10% (annualized return of 62.20%) over a 44 to 48 day period. This was not an easy arb play as Amgen played hard ball and was able to negotiate a lower price, but it’s nice to see this is finally done with…

Year to Date Performance

While we close out Q3, it’s probably a good idea to review my performance to date. As of the close on September 30^th, my performance year to date is +31.28%. The monthly gains / losses are as follows:

January -0.3%

February +4.67%

March +5.03%

April +5.13%

May +5.13%

June -0.37%

July +2.3%

August +3.3%

September +6.39%

I believe I’ve done a decent job this year in generating a more consistent monthly performance. Prior years, my monthly performance has been lumpy with some good and some disastrous months. I’ll be nice to determine my alpha (abnormal rate of return) in order see if I’m generating returns with low risk. Maybe my next project…

My largest position is currently Spreadtrum Communications (Ticker: SPRD), which is waiting for PRC regulatory approval in order to close followed by Constellation Brands (Ticker: STZ), Apple (Ticker: AAPL) and VISA (Ticker: V). I also have smaller positions in the mix such as Biogen Idec (Ticker: BIIB), Master Card (Ticker: MA) and Vertex Pharmaceuticals (Ticker: VRTX). The portfolio is basically divided into special situations and growth plays.

So I’m just researching some new special situation plays while I wait for Onyx Pharmaceuticals (Ticker: ONXX) and Spreadtrum Communications to close.