August 2015 Performance

Do I need to say any more about the month of August? I do expect this volatility to continue going forward, which is actually not bad. People were getting very complacent and we do need people to start doubting this market. As they say, the market climbs a wall of worry.

My portfolio was actually down by more than 10% at one point, but ended only down -0.89% for the month. The closing of the Receptos acquisition by Celgene (Ticker: CELG) definitely helped a bit. Constellation Brands (Ticker: STZ), which is my largest holding, held up well during this market volatility.

So right now, it’s just a wait and see. Like I mentioned earlier, WuXi Pharmatech (Ticker: WX) is my only arb play at the moment and it comprises only ~ 15% of my portfolio.

That’s all I have to report…

2015 Performance Year to Date = +20.76% with the running monthly returns as follows:

January +3.4%
February +7.03%

March -0.33%

April +0.39%

May +5.59%

June -1.2%

July +5.48%

August -0.89%

Receptos = Done Deal

Receptos (Ticker: RCPT) is finally done with the cash hitting my account today. I generated a net gain of 1.87% (25.73% annualized yield). I did not buy back any of my short Puts in Receptos so I will let those will expire worthless at the September options expiration. I’ll continue to play conservatively unless a very compelling opportunity arises. It’s going to take a bit of time for the market to repair itself from the recent sell off.

For those who want to make some lunch money, The St. Joe Company (Ticker: JOE) is initiating a tender offer for $18.00 per share. There is an odd lot priority so the company will purchase all shares tendered for those with 99 shares or less.

Tendered Receptos

I tendered all my shares in Receptos (Ticker: RCPT) and looking for this deal to be completed next week. I will likely let the short Put positions in Receptos expire in September as well. This was a really nice risk / reward opportunity and hoping to see another one like this soon.

I did initiate a starter position (~ 4.5% position) in WuXi Pharmatech (Ticker: WX) at $43.60. They primarily perform outsourced R&D projects for pharma / biotech companies. This company is being acquired for $46.00 in cash via a management / consortium of private equity investors. This is a Chinese based company so I expect a China discount. I see this as a reasonable risk / reward opportunity assuming this deal is closes by the end of the year. This is definitely not one of those all in plays, but I can see myself going up to a 10% position at some point. 

My merger arb positions have really dried up… Just being patient and let the next opportunity present itself.

On a side note: I unfortunately did get a few IPO shares in Amplify Snack Brands (Ticker: BETR) at $18.00 per share. I was expecting a pop up and not a pop down! Anyways, it was a little lesson not to get too greedy. Fortunately, this was a tiny / negligible position. So no damage, but still I don’t like losses…

EDIT: I added to my holding in WuXi Pharmatech amid the market weakness (currently ~ 11% position).

Receptos Position

I’m finally finished building a long position in Receptos (Ticker: RCPT), which currently makes up ~ 28% of my portfolio. You’re probably aware that Celgene (Ticker: CELG) is acquiring Receptos for $232.00 in cash via a tender offer, which expires on August 24^th. My average purchase price is $227.74 and looking for a net gain of 1.87% by the end of August (~23% annualized return assuming the cash hits my account on 8/31). I also sold a bunch of Puts on Receptos. We should know by next Tuesday if the antitrust regulators give the green light on this deal. When I see the odds are so much in my favor such as a deal like this, I’m very aggressive and play big. There’s also been a lot of speculation of a higher bid, but I just don’t see it happening.