Sunday, July 01, 2018

June 2018 Performance

I was able to easily generate a net loss of 1.51% for the June. The bulk of the loss can be attributed to my trading debacle in NXP Semiconductors (Ticker: NXPI) and the earnings short fall in Constellation Brands (Ticker: STZ). I initially bought NXP Semiconductors with the expectation of a fairly quick approval by the China, but the news reports of an imminent approval did not pan out. I exited the NXP Semiconductors with a nice loss. Constellation Brands just reported earnings with the bottom line missing estimates. I am not too concerned with Constellation Brands as the top line generated healthy growth. Increased marketing and transportation cost negatively impacted the bottom line for Constellation Brands. Overall, I was really disappointed on how I handled the NXP Semiconductors trade as I had no edge at all.

So what’s new? I picked up a few of the long dated short Puts on Rent-A-Center (Ticker: RCII), which is being acquired by Vintage Capital for $15 per share in cash. Vintage Capital has been in pursuit of Rent-A-Center for over a year. The acquisition of Rent-A-Cent would complement their other rent to own company, Buddy’s Home Furnishings. It is a private equity deal and they do have a tendency to bolt when things start going south. I don’t see it in Rent-A-Center as they’re in the early innings of a turn around with their free cash flow showing a nice increase. This is almost like a strategic deal by Vintage Capital. Vintage Capital expects this deal to close by the end of the year.

And that's it for June...


2018 Performance = +12.90% with the running monthly returns as follows:

January +2.80%
February +2.82%
March -0.03%
April +2.10%
May +6.25%
June -1.51%

18 Comments:

At July 02, 2018, Anonymous Anonymous said...

Hi MT,

Regarding Rent A Center (Symbol RCII)
Why is it worth it to make less than 2% (current price is $14.72) in what could be 6 months? Is there more to it than what I see?

Thanks



 
At July 02, 2018, Blogger Money Turtle said...

I didn't buy the common. I sold the Jan 2020 $12 Puts.

 
At July 02, 2018, Blogger Yuanxi Zhang said...

how much margin would it take for selling a contract?

 
At July 02, 2018, Blogger Money Turtle said...

The maintenance requirement for RCII is $147.50 per contract.

 
At July 03, 2018, Blogger Yuanxi Zhang said...

sounds like a good deal!

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

i sold a few NXPI Jan 2020 $90 puts for about $6.20 average... if the merger goes forward, the options will accelerate and close, netting me all the premium... if merger does not go forward, I will buy NXPI at $90 per share if the options got exercised.

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

Merger Pie, Not bad for those Puts on NXPI. You'll actually be buying NXPI for $83.80 ($90-6.20) if those Puts get exercised.

 
At July 04, 2018, Anonymous Anonymous said...

What are odds China will actually approve the deal considering all the trade tension talk?

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

Anonymous, wish I knew the answer to that question...

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

thanks MT... i hope they will be approved soon..

 
At July 05, 2018, Anonymous Anonymous said...

China only understands two things, Strength and Pain.

President Trump is demonstrating Strength and resolve with trade inequities.
How much Pain will Xi Jinping be willing to put his people through before he buckles?

Pending: If U.S. is able to reach an agreement with EU on zero tariffs for automobiles, the tide change favors U.S. to resolve other trade issues as EU understands China is the real outlier with various trade issues.

 
At July 05, 2018, Anonymous Anonymous said...

Does QCOM and NXPI have enough insider visibility to consider extending the deal closing date beyond 7-25-18 or throw in the towel and move on?

This is the big $44 billion question.

 
At July 11, 2018, Anonymous Anonymous said...

ZTE seems to finally have the green light... we'll see if that translates to movement on NXPI soon enough...

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

free money at JASO closing on 18 Jul at $7.55 (minus 0.05 ADR fee) so expect to earn about $0.06

 
At July 13, 2018, Anonymous Anonymous said...


Hi mergerpie,

Can you point us to the news report with the detail on JASO? I have not been able to see the details of the deal. Where do you see July 18 as the closing date? Are there any reasons this deal can fail?

Thanks

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

Merger Pie, I was able to pick up a few shares of JASO. Thanks!

https://www.adrbnymellon.com/directory/corporate-actions

Select: JA Solar Holdings and you will see the corporate action PDF document.

JA Solar Holdings Co., Ltd ("JA Solar" or the "Company") - Mandatory Exchange for Cash/Termination

 
At July 13, 2018, Anonymous mergerpie said...

there is always some premium left even when everything is confirmed for china deals...

 
At July 16, 2018, Anonymous Anonymous said...

If you have not figured it out yet, NXPI has a less than 50% probability of getting approved by China or approved before the 7-25-18 merger deadline.

This Friday will be the last day of the tender Offer extnsion. QCOM would have to move heaven and earth to obtain a 70% tender offer minimum threshold by Friday if the deal were to get approved this week.
QCOM and NXPI would have to agree to extend the merger once again. There is to many financial issues behind the scenes to work out due to China uncertainty to consider extending the tender offer.

Also usually with any tender offer there is a short period squeeze out process. Again not enough time to do this if China were to approve this week.

As much as I want to see the deal approved, all are best to plan accordingly with stock / options plans before any official news is released.

We have slow pain and rapid pain. NXPI is currently in a slow pain state. Please do not wait for the rapid pain or you may regret it.


Good Luck to all traders.

 

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