Blueprint Medicines Merger Arb

Back in the merger arb game by picking up some Blueprint Medicines (~ 7% position), which is being acquired by Sanofi for $129 in cash plus a cvr of up to $6.00. The stock is currently trading at ~ $127.79, which gives you an annualized returnn of 5 – 6%. Not great in terms of annualized return, but I am playing this for the free cvr. I’m modeling this deal to close at the end of July. I don’t see any regulatory issues.

Regulatory / Closing Timeline (updated based on the tender offer filing):

·       HSR filed on 6/9.

·       HSR waiting period expires on 7/9.

·       Tender Offer Expires on 7/16.

May 2025 Report

It’s still really hard to have the conviction to initiate long term positions in this market with the tariff overhang. I’m just maintaining my current cash position at ~ 10% and just waiting for opportunities to present itself. Visa and Mastercard are both doing well in this environment, which makes sense as they are relatively immune to inflation. If stuff cost more, they simply will get a bigger cut of the transaction. Early in the crypto days, there were talk that blockchain was going to displace credit card transactions, which has not happened. I have considered trimming Visa and Mastercard as everyone is targeting their “anticompetitive” pricing, but I’ll probably hang on to a full position based on a bank friendly administration. These days, policy decisions can change very quickly so need to consider all of the risks.
 
 
2025 Performance = - 5.59% with the running monthly returns as follows:

January - 2.61%
February + 2.79%
March – 4.16%
April -1.67%
May +0.07%

IRA Mistake

I can’t believe I overlooked the strategy of selling covered calls in an IRA account. All these years I’ve been selling options in my non-retirement account. I did not even pop into my mind until I stumbled onto a YouTuber, who was doing it. One of my larger holdings in my retirement account is Apple so I should be able to generate a few dollars and probably just reinvest those into Apple. I really don’t care if it’s called away since there are no tax consequences, and I’ll just buy it back. You always learn something new in this game…

April 2025 Report

To say the least, it’s been a challenging year. April was one of the less volatile months with a loss of only 1.67%. I’m still sitting on ~ 10% cash and waiting for good values to develop. I see a retest of the recent lows and that may be a good time to nibble a bit. It’s hard to see this market making any new highs anytime soon with these rates and elevated inflation. 

I focus primarily on dividend paying stocks these days as this is how you really generate positive long-term returns. You have to reinvest the dividends and allow it time to compound. Over the long term, ~40% of the gain is generated from the dividends. The large pharma sector looks very appealing with the high dividend yields. Of course, you have a bit of unknowns with potential tariffs and a less than market friendly FDA head. Pfizer looks interesting with a 7.7% dividend yield, but the stock price is back to the 1997 level. Just have to wonder how safe the dividend is even though the company has committed to maintaining it.

Started selling naked short puts again after a brief break. As witnessed from the recent downturn, an increase in implied volatility can work for and against your options positions. Fortunately, I had low options exposure during the market downturn. I would have been cooked if I had full sized positions. In any case, I still enjoy picking up pennies in front of the steam roller.
 

2025 Performance = - 5.66% with the running monthly returns as follows:

January - 2.61%
February + 2.79%
March – 4.16%
April -1.67%

March 2025 Report

Well, it is a bit surprising to see how calm people are with this market downturn. I closed out all my short puts and sitting on cash. In this environment, you just want to survive and have the cash available when the market will inevitably recover. I just see the market grinding lower over time. It is an entirely new generation of investors out there and they have not experienced any real downturn other than COVID. If you survived the dot.com bubble, you can make it through any volatile market.
 
Stay safe out there!
 
 
2025 Performance = - 4.06% with the running monthly returns as follows:

January - 2.61%
February + 2.79%
March – 4.16%

February 2025 Report

This will be just a short post as there is really nothing new to add other than I’m back to break even after generating positive results in February. Visa was a big reason for this gain as this sleeping giant has come back to life. Apple and Mastercard generated more modest gains. Constellation Brands stabilized a bit after news that Berkshire Hathaway initiated a stake in the company, but the stock still declined ~ 3% for the month. Overall, I remain cautious with this market and continue to build cash (~10% of portfolio) from premiums generated from selling options. I have no problem sitting on cash yielding ~ 4% while waiting for opportunities to show up.
 
2025 Performance = + 0.11% with the running monthly returns as follows:

January - 2.61%
February + 2.79%

January 2025 Report

The New Year has started out with a dud with the portfolio generating a return of -2.61%. This can be attributed to Constellation Brands (down ~ 18.2%) and Apple (down ~ 5.8%). Constellation Brands sold off on disappointing earnings and the upcoming tariffs on Mexico. Hopefully, the tariffs are just temporary, and things can get back to normal. If Constellation Brands sells off more, I will start adding to the position as its valuation is very attractive and the stock has priced in so much bad news. Apple needs to get its AI implemented in additional countries before people start upgrading their older iPhones, but I have confidence in Apple getting this done. What saved the portfolio was Visa, which gained ~ 8.2%. Visa has done nothing for almost 2 years and finally came back to life, so patience does pay off. So, maintaining ~ 10% cash position and will see how things play out.

Yes, still messing around with selling short Puts to generate some additional income. I’m getting more nervous as investor sentiment is at its high point, which can lead to a nice market correction. I’ve been using 50% plus of my margin buying power with the naked puts, which is in the danger zone so I may back off a bit. I’ve been lucky so far with picking up pennies in front of the steam roller.

In the Chinese Zodiac, this is the year of the snake so one needs to be extremely cautious with their investments.

2025 Performance = - 2.61% with the running monthly returns as follows:

January - 2.61%