Wednesday, May 30, 2018

May 2018 Performance

The strong performance in May can be primarily attributed to the closing of AveXis, which was successfully acquired by Novartis (Ticker: NVS). I played this deal aggressively via common stock and short Puts. This deal took only 37 days to close, which was one of the quickest closings that I can recall. I had a strong conviction in this deal closing and talk of potential antitrust delays provided a nice risk reward opportunity.

The following stocks were also positive contributors in May: Apple (Ticker: AAPL), Alibaba (Ticker: BABA), Mastercard (Ticker: MA), Qiagen (Ticker: QGEN) and Visa (Ticker: V). On the other hand Sanofi (Ticker: SNY) and Constellation Brands (Ticker: STZ) dragged down the May performance. As I have mentioned before, I remain cautious with this market and have a ~ 18% cash position.

I’m really late to the game with Monsanto (Ticker: MON), but I’ve been selling a few of the longer dated Puts. It’s not much of a premium, but it’s pretty much a risk free play at this point. Ideally, Monsanto closes by mid-June in time for the June options expiration (accelerated expiration). The more likely scenario is that these long dated options will expire in July expiration with the assumption that Monsanto closes by the end of June.

That’s about it for the May recap…    


2018 Performance = +14.62% with the running monthly returns as follows:

January +2.80%
February +2.82%
March -0.03%
April +2.10%
May +6.25%

42 Comments:

At June 04, 2018, Anonymous Anonymous said...

So according to the following news release, the MON deal should be complete by Thursday. This will be on time for the June option expiration.
--------------------------------------------------------
Germany's Bayer to complete Monsanto purchase on Thursday
(Associated Press•June 4, 2018)

BERLIN (AP) — German pharmaceutical company Bayer AG said Monday that it plans to complete its purchase of U.S. seed and weed-killer maker Monsanto Co. this week after receiving all the required approvals from regulators.

Bayer said in a statement that it plans to complete the acquisition on Thursday.

 
At June 04, 2018, Blogger Money Turtle said...

MON: Nice, this is the best case scenario.

 
At June 04, 2018, Anonymous mergerpie said...

its confirmed. i sold all my holdings early today...going to redeploy my funds

 
At June 05, 2018, Anonymous Anonymous said...

Hi MT,

With MON coming to a close, what are other takeover/arb deals are you watching? How does NXPI look?

Thanks

 
At June 05, 2018, Anonymous mergerpie said...

I believe MT doesn't like such a risky arb like NXPI.... i am holding a medium position such that a loss will not cripple my trading funds... do not over commit on NXPI because of the political aspect of the merger...

 
At June 05, 2018, Blogger Money Turtle said...

I'm not playing NXPI right now. No edge at all, it's all about US / China trade.

I don't see any interesting arb plays out there right now so just waiting patiently.

 
At June 07, 2018, Anonymous Anonymous said...

Is NXPI safe to buy or still fireworks

 
At June 07, 2018, Blogger Money Turtle said...

NXPI: I took a ~7% position at ~ $122 today. With the ZTE deal reached, the odds look good for China approval.

 
At June 07, 2018, Anonymous Anonymous said...

What is the buy out price for NXPI?

Is there an estimate as to the time frame involved here?

 
At June 07, 2018, Blogger Money Turtle said...

NXPI: Buyout price is $127.50

Current tender expires on 6/8 and will be extended (likely another 14 days). Waiting for China to approve the deal, which can occur any day now.

 
At June 08, 2018, Anonymous Anonymous said...

Some saber-rattling from senate about the ZTE deal... that a driver to take profits in anyone's mind?

 
At June 08, 2018, Anonymous Anonymous said...

All,

NXPI is a gift that keeps on giving and taking away and you have to watch it constanly. The best strategy may be to buy the dips and sell the rips. Buy and hold and you will pull your hair out. Know your daily support and resistance levels and use them as buy / sell guides. Next news out of China may be Sunday evening U.S. time.

Be$t of Luck.

 
At June 08, 2018, Anonymous mergerpie said...

NXPI.. it has gone down and up so many times...even if ZTE deal is reached..we never know if there is still a bump further down the road...keep nimble...i am long a medium position

 
At June 11, 2018, Anonymous Anonymous said...


Assuming one is relatively comfortable with legal risk tomorrow, trying to decide whether it's better to buy non-TWX vertical deals (CVS/AET or ESRX/CI) or just add more TWX... I'm guessing the spreads will all be correlated...

 
At June 11, 2018, Anonymous Anonymous said...

All,

I do not like the TWX deal at this time. Judge could rule for TWX, could rule against TWX or force both sides to work out their differences. Plus T price at a low so TWX deal price adjusted to lower range.

Me likes AET deal as 70% ($145) of deal price includes cash and could be some what correlated to TWX decision. Did you know that AET exceeded full deal price on 1-29-18 and since has come down mostly due to CVS fluctuation? Take position in AET before TWX judge ruling to be safe. AET offers multiple ways to trade, stock, calls, puts or combo.


Happy Trading.

 
At June 11, 2018, Anonymous mergerpie said...

we cannot assume that if T+TWX wins, all the rest of the vertical mergers will have an easier chance of going through...although the spreads will go down in the short term, longer term it will still revert to where it should be...

i am thinking each vertical deals come with its own set of dynamics and problems...even if T+TWX proves that their merger does not increase cost for consumers significantly, we cannot assume other vertical deals will get the same ruling..at the end of the day is the facts and figures. what I do think is DOJ will probably take a hard look at future vertical mergers regardless of the ruling...

 
At June 11, 2018, Anonymous mergerpie said...

DOJ will approve if enough divestitures are given to preserve competition even if the merger is a horizontal one... look at Bayer+MON...Bayer basically take away the biotech core of its agri-chem portfolio and inserted MON's.... AT&T refused to give away any core parts and this complicated the merger talks leading to the lawsuit... of course i do think the trump factor played a part too.

 
At June 12, 2018, Anonymous Anonymous said...

MT,
U still in NXPI? Do you have a stop loss exit strategy?
Thanks

 
At June 12, 2018, Blogger Money Turtle said...

I’m still in NXPI. Just waiting patiently...

 
At June 12, 2018, Anonymous mergerpie said...

there we go again for NXPI... on the bright side ZTE has begun process to re-start their business and I believe the whole bill will take weeks to months to reach Trump and even then he maybe able to veto it...

 
At June 13, 2018, Anonymous Anonymous said...

Are you holding on to NXPI? Thank You.

 
At June 13, 2018, Blogger Money Turtle said...

Yes, still holding NXPI.

 
At June 13, 2018, Anonymous Anonymous said...

Can someone provide a summary explanation of the prospects for NXPI?
Is it likely to go through? What does it depend on, is it only China's approval? When?
Why has it been going down lately?
If the deal does not go through, what is likely to be the price of NXPI?

Thanks

 
At June 13, 2018, Anonymous Anonymous said...

anonymous,

Your questions indicate to me you are not very well informed about the NXPI pending merger with QCOM. I do not know if you are truly serious or just trying to play games with us. If you are truly serious, in my opinion you should not, I repeat, you should not invest in NXPI because you do not have enough information nor responsibility to learn on your own, to risk your money on such a speculative stock and event.

I am only trying to protect you from yourself. Please divorce yourself from greed and the element of risk taking, otherwise you could get hurt financially.



Good luck

 
At June 13, 2018, Blogger Money Turtle said...

Can someone provide a summary explanation of the prospects for NXPI? I'll try...

Is it likely to go through? I hope so... I believe Congress' attempt to re-impose the US ban gets watered down and ZTE will be back in biz. The wild card is the potential tariffs.

What does it depend on, is it only China's approval? Yes

When? That's a good question. Days, weeks, never? Seriously, all regulatory approvals have been received with the exception of China. It appears China is ready to sign off on the deal, but want to see if ZTE gets resolved and the decision on potential tariffs.

Why has it been going down lately? Congress attempting to block the ZTE deal and tariffs. This stock is in the hand of arbs and will sell with any hint of trouble.

If the deal does not go through, what is likely to be the price of NXPI? The stock gets dumped and could fall to the low 90s or lower?

Like the previous poster mentioned, you gotta do some research to back up your decision on the stock. I know this is a risky one and sized it appropriately in which a break will sting a bit, but will not vaporize my gains for the year.

 
At June 14, 2018, Anonymous Anonymous said...

Problems solved. China approves NXPI buyout
Bought some AH at 124

 
At June 14, 2018, Blogger Money Turtle said...

Wow, I have to admit that I am totally shocked that approval was granted so soon. I thought this one would drag to July considering what's been happening.

 
At June 14, 2018, Anonymous Anonymous said...

Will the deal close tomorrow? Tender offer expires tomorrow

 
At June 14, 2018, Blogger Money Turtle said...

They will have to extend the tender for another week. This deal could possibly close by the end of next week.

 
At June 14, 2018, Anonymous Anonymous said...

MT,

Yes NXPI news is a surprise but a pleasant $urprise. I bet China wanted to get ahead of President Trump's tariff announcement on Friday rather than wait and see in hopes he may lighten up some. China is gradually learning how to read and work with Trump. QCOM in San Diego must be celebrating this evening.

Best of Luck to all longs and arbs.

 
At June 14, 2018, Anonymous mergerpie said...

Congrats everyone on NXPI...we made another bundle! Surprised about the speed too after China dragging their feet.

 
At June 14, 2018, Blogger Money Turtle said...

WSJ reporter tweeting: "...Beijing hasn’t cleared the Qualcomm/NXP deal." Who's right?

 
At June 14, 2018, Blogger Money Turtle said...

This was from Techcrunch.com :

"The U.S.-China trade battle enters an important new phase. The South China Morning Post is reporting that China’s Ministry of Commerce will clear Qualcomm’s pending $44 billion acquisition of NXP Semiconductors. One independent source also conveyed the same news to TechCrunch, although there has been no official word from Qualcomm, NXP or China at time of publication..."

Independent source also reporting the same news according to Techcrunch.com.

Just surprising that WSJ, Bloomberg or Reuters didn't break this news.

 
At June 14, 2018, Blogger Money Turtle said...

Bloomberg now confirming the scoop from the South China Morning Post. It's a go for approval...

 
At June 14, 2018, Anonymous Anonymous said...

MT,

As I have been involved in the NXPI roller coaster for some time, let me make the following points:

1) China is 12 hours ahead of the U.S. in time. So the SCMP article was discovered around Thu 6:pm U.S. time. So advance 12 hours to China time as Friday 6:am which may indicate Thursday was when MOFCOM approval was completed.

2) We all like press / media "print" articles / confirmation from Reuters, WSJ, Bloomberg as our ultimate business news sources which the algos trade off of. Since the SCMP story came out, now expect all of our business news sources to reach out to their reporters in China over night (U.S.) during Friday daytime (China) to chase down their own contacts so they can write their stories and hopefully print stories early Friday morning or later in the day on Friday in the U.S. Its almost like a trust but verify print news process.

3) Expect to here something from QCOM Friday morning as the NXPI tender offer expires Friday at 5:PM but will be extended another week.

We may still be subjected to noise from President Trump trade tariffs to be released on Friday, Senate / House bills with ZTE language White House is not happy with which is suppose to be renegotiated next week and ZTE on 30 day clock to complete all steps of re-instatement agreement.

Once we have acceptable confirmation NXPI has been approved by MOFCOM / QCOM, I cannot anticipate any reversal by China. The above will be minor noise until closing as the horse will have already left the barn.


Hang in there. After this great trade we should all take the summer off and de-stress.

 
At June 15, 2018, Blogger Money Turtle said...

Definitely a roller coaster... Reuters saying not approved yet.

 
At June 15, 2018, Anonymous Anonymous said...

MT,

Too many news sources now not to be true unless they all rely on the same few sources. Note there have been no denials by China, just dead silence. NXPI pre market trading cheaper this morning than last evening after market.

Hang tuff.

 
At June 15, 2018, Anonymous Anonymous said...

Looks like awaiting approval

 
At June 15, 2018, Blogger Money Turtle said...

I’m out. Took a ~ 8% loss on this one. It was a gamble in which I had no edge at all. I think China may just run down the clock on this one if the trade war escalated. Good Luck All...

 
At June 16, 2018, Anonymous Anonymous said...

I'm perplexed by the lack of news on NXPI... has anyone come across a situation like this before?

 
At June 16, 2018, Anonymous Anonymous said...

Well it is the weekend. China is 12 hours ahead of us. We work they sleep, we sleep they work. I think I read somewhere China has a national holiday on Monday so we have to wait for their work day on Tuesday which means maybe Monday evening we here something or Tuesday evening??

This deal has the most unusual set of circumstances (ZTE sanctions, global politics, global trade, trade sanctions, etc.) that we have ever had with merger arb. High risk, high reward, high loss if it does not get approved in time. Trump will not blink and is forcing China to change its trade behavior. China has the most to lose. Will China create casualties (NXPI not even an American company, QCOM the American acquirer) in the mean time???

Unless you have the stomach and skills to trade and hedge very well here, one can get hurt.

 
At June 16, 2018, Anonymous Anonymous said...

The world is witnessing a first class high stakes public trade negotiation between Trump and Xi Jinping. Trump is determined to level the trade playing field between the U.S. and China. Trump will never back down as he has promised too many people, he believes he is right and he is actually correct. Xi Jinping will not back down as he has to show his people China will not be bullied. Xi Jinping is betting the U.S. political pressure will buckle Trump before China's economy starts to feel the pain.

Trump has twice the economic leverage, knows how to push the right buttons and is focused like a laser on free trade. Did you here his comments at the G-7 meeting in Canada? No country should have tariffs. Zero tariffs worldwide anyone?

1) U.S. $19.42 trillion dollar economy
2) China $11.8 trillion dollar economy

For perspective:

3) Japan $4.84 trillion dollar economy
4) Germany $3.42 trillion dollar economy


Who blinks first? How long will it take?

I could see a scenario where QCOM and NXPI work out another extension if needed.

What if QCOM went ahead with the NXPI merger without the China's SAMR approval?
What would happen to QCOM? Banned from selling in China?


Lastly, the news leak late last week was about MOFCOM approval. The delay appears to be China’s State Administration for Market Regulation (SAMR). This must be the political arm that holds the final rubber stamp.


As painful as this is for many of us, its alot better than nuclear war, think about it.

 

Post a Comment

<< Home