Sunday, January 03, 2021

2020 Year End Review

What a year! That’s an understatement. If you told me that we’ll be engulfed in this pandemic, I would have been happy with a down 20% return for the year. Looking back, I should have been much more aggressive in acquiring shares during the down draft in February and March. Instead I just nibbled on some Mastercard and Visa, which I did manage to buy near their lows, but it simply was not enough to make a difference. I maintained a cash hold of ~ 15% through the year until the Airbnb ipo came along. I deployed some cash into Airbnb. Other than that, I maintained my usual long term holdings and participated in the merger arb game. Surprisingly I managed to generate a total return of 32.81%, which I can really thank Apple.

Early in the year, Qiagen was in play once again with Thermo Fisher making an offer. I sold half my position when Qiagen traded above the offer price, which was a mistake. Looking back, I should have held on to my entire stake. I was afraid that Qiagen would plummet if Thermo Fisher walked. Thermo Fisher did not offer a big bump in price and walked. Qiagen held steady and continued its steady ascent.

It was actually a fairy active year for merger arb plays. The merger arbs contributed to ~ 7% of my overall gains, which generated some nice positive alpha. I was involved in Aimmune Therapeutics, Forescout Technologies, Immunomedics, Jumei International, Mellanox, Momenta, Myokardiac, SORL Auto Parts, Stemline Therapeutics and Tiffany. I would say majority of these merger arb plays were executed via Short Puts. I really like using options with these high probability plays. I am still in Tiffany via Short Puts and looking for this deal to close by the end of the week.

As I mentioned earlier, I finally initiated a new position and that was in Airbnb (~4% position with an average price of ~ $137). I am looking to add to this position in the low $100s. I am definitely holding this for the long term as I see this company disrupting the travel industry and accelerating its growth. I seldom go for these high flyers, but Airbnb has proved that it can survive through this pandemic. Time will tell, but I like the odds of this company growing significantly over time. You really have to be patient and hold for the long term to see the big gains.

So what do I expect for the New Year? I hope to see some of my laggards in 2020 step up such as Alibaba, Mastercard, Visa, Sanofi and Constellation Brands. Honestly, if I can generate 10%+ in 2021, I’ll be very pleased.

That’s all I have... Have a Very Healthy and Prosperous New Year!

 


2020 Performance = +32.81% with the running monthly returns as follows:

January +2.7%
February -6.8%
March -9.9%
April +12.3%
May +6.6%
June +3.8%
July +6.1%
August +11.8%
September -4.2%
October -6.7%
November +10.8%
December +5.5%

Annual performance for the past nine years is as follows:

2012 +61%
2013 +44.61%
2014 +29.47%
2015 +33.48%
2016 +14.61%
2017 +42.12%
2018 -4.11%
2019 +40.17%
2020 +32.81%


CAGR from 2012 to 2020 = 31.43%

Wednesday, December 02, 2020

November 2020 Performance

November was a strong month for anyone who had a pulse. I did not make any changes to the portfolio [Apple, Alibaba, Mastercard, Qiagen, Sanofi, Constellation Brands and Visa]. My cash position as a percentage of the portfolio decreased to ~ 14% due to the portfolio appreciation. I will most likely take a small bite in Airbnb when it goes public next week and slowly average in over the weeks / months. This is one where I really want to build a nice position and hold for the long term.

I continued to play the merger arb game with Short Puts in MyoKardia and Tiffany & Co. I still have some Tiffany and may continue to play this to closing. Tiffany is as low risk as you can get in this merger arb game.

That’s all I have to report… My eyes will now be focused on the Airbnb IPO.

 

2020 YTD Performance = +25.9% with the running monthly returns as follows:

 

January +2.7%
February -6.8%
March -9.9%
April +12.3%
May +6.6%
June +3.8%
July +6.1%
August +11.8%
September -4.2%

October -6.7%

November +10.8%

Saturday, October 31, 2020

October 2020 Performance

I guess October is one of those typical months where you give back one’s gains. My long positions didn’t fair well as it declined with the market. What saved me somewhat was the merger arb opportunities out there. I took advantage of several in October and they all paid off nicely. My current portfolio allocation is 85% equities and 15% cash, which is fairly consistent for much of the year.

Let’s get into the merger arb plays… (1) I entered a Short Put position in Aimmune Therapeutics. I went in big after they received HSR approval. The puts still had a fairly decent premium as the company was waiting for German antitrust approval. Nestle also owned a big chunk of Aimmune Therapeutics stock so meeting the minimum tender threshold was a certainty. This was one of those plays where the odds of closing were so favorable that it was literally free money in my book. (2) I played Immunomedics via Short Puts and Long Common. This one has a nice spread, which I still couldn’t figure out. I couldn’t go too big in this one as most of my margin money was tied up in Aimmune. (3) Finally, Tiffany… I play this one with Short Puts when news leaked that Tiffany and LVMH had agreed to a lower price. I still have some November Short Puts in Tiffany. I’m still looking to add some Short Puts and / or Long Common. The probably of this deal breaking is literally 0% with this updated merger agreement.

I’ll continue to play it safe by focusing on merger arb plays. This is were I am able to generate some decent income in the face of a 0% interest environment. Just trying to survive in this crazy market…  

2020 YTD Performance = +13.6% with the running monthly returns as follows:


January +2.7%
February -6.8%
March -9.9%
April +12.3%
May +6.6%
June +3.8%
July +6.1%
August +11.8%
September -4.2%

October -6.7%

Friday, October 02, 2020

September 2020 Performance

What goes up must come down and that was the story for September. There were no changes to my long positions and still maintaining a cash position of ~ 14%. The interest I am receiving from my cash is a pathetic at 0.01%, can it go any lower? Anyways, I have to keep a good chunk of the cash at my brokerage as it serves as maintenance requirement for my margin trades.

I initiated merger arb positions in Momenta Pharmaceuticals and Aimmune Therapeutics via Short Puts. Momenta just closed and those options will be accelerated to expire on October 16th. Aimmune received HSR anti-trust approval and is currently awaiting German anti-trust approval, which is expected on October 8th. The Aimmune tender is scheduled to close on October 9th. I am also keeping an eye on Immunomedics, which has a nice arb spread for some reason.

I’m still interested in Ant Financial and Airbnb IPOs, but the price has to be somewhat reasonable.


2020 YTD Performance = +21.8% with the running monthly returns as follows:

January +2.7%
February -6.8%
March -9.9%
April +12.3%
May +6.6%
June +3.8%
July +6.1%
August +11.8%
September -4.2%

Wednesday, September 02, 2020

August 2020 Performance

As they say: The Beat Goes On… I don’t know what to make of this market, but the market knows of only one trajectory and that is UP. The percentage of cash has decreased to ~ 13% of my portfolio simply because of the portfolio appreciation. I can thank Apple and Visa for a big portion of the portfolio appreciation. I did not make any changes to my core holding.

I did execute trades on some recent mergers such as Principia Biopharma, Momenta Pharmaceuticals and Aimmune Therapeutics. I played via short Puts on all of those positions. I exited Principia Biopharma and Momenta Pharmaceuticals with some small gains. I continue to maintain a short Put position in Aimmune Therapeutics. I like all of these deals as I do not see any antitrust issues and all are structured as tender offers, which should lead to quick closings. I may get back into Principia Biopharma and Momenta Pharmaceuticals.


I am waiting to deploy some cash into the upcoming IPOs in Ant Group and Airbnb. I really admire both of these companies and they should do well over the long term. Just need to see how the market prices both of these deals.


That is it for the August recap…



2020 YTD Performance = +27.1% with the running monthly returns as follows:


January +2.7%
February -6.8%
March -9.9%

April +12.3%

May +6.6%

June +3.8%

July +6.1%

August +11.8%

Sunday, August 02, 2020

July 2020 Performance

Another strong month for the market as the Covid-19 infections accelerate. Hard to get a good read of this market with the short term market volatility, but what really matters is the free cash flow generated by companies over the long term. What I’ve learned over the years of investing is that you really need to have a buy and hold mentality to make any serious money in the market.   

Many of my holdings (Constellation Brands, Visa, Mastercard and Apple) recently reported earnings and all produced decent results. Apple simply blew away the numbers, which is mind boggling in this environment. These are my long term holds and will take a lot to make me sell any of these positions. All of these companies generate strong free cash flow and the value of these companies should continue to appreciate nicely over time.  

I did enter the merger game once again with a Short Put position in Forescout Technologies. There was a little drama with this one as Advent International tried to walk away using the Material Adverse Event as an excuse. Advent did the right move by renegotiating the merger with a small cut in price. Advent would have lost this court battle with Forescout Technologies.

Also, Thermo Fisher Scientific kind of came to their senses and bumped the price to 43 Euro for their acquisition of Qiagen. I still think this is a bit low, but I am leaning towards tendering at this price. Qiagen reports August 4th so I’ll wait and see how the market reacts to the earnings report before deciding whether to tender.

I’m continuing to sell way out of the money weekly Puts on some big tech names to generate some income. That’s about it for July. 

 

2020 YTD Performance = +13.7% with the running monthly returns as follows:

January +2.7%
February -6.8%
March -9.9%

April +12.3%

May +6.6%

June +3.8%

July +6.1%


Sunday, July 05, 2020

June 2020 Performance

I guess as the number of Covid-19 cases go up, the market follows in lock step. Seriously, the Fed pumped so much liquidity in the market. You simply cannot fight the Fed in this environment. I still continue my cautious stance with a ~ 15% cash position. It’s starting to be challenging to stay in cash when it’s earning you nothing. I’ll remain disciplined and will wait for better opportunities to show up.


I’ve been experimenting with selling way out of the money weekly puts to try to generate some income. It is a somewhat risky strategy as a black swan event on one of these positions can literally blow you up. I’m just playing it small and just trying to get a feel with this strategy.


Not much on the merger arb space. It is interesting that a top shareholder is questioning the rationale of Qiagen’s takeover by Thermo Fisher at the price of 39 Euros. I also share the same view and will not tender my Qiagen shares for 39 Euros. I believe Qiagen is better offer as an independent company in this environment. I’m sure other shareholders have a similar view. It’ll be interesting to see how this plays out. 

 

I’m starting to do some work on some going private China plays such as 58.com. I’m only focusing on the ones that have definitive agreements in place. It’s not something I’ll go big in, but they generally offer a very attractive annualized returns.


That’s it for the June. Amazing that we’re already mid-way through the year.

 

2020 YTD Performance = +7.2% with the running monthly returns as follows:

January +2.7%
February -6.8%
March -9.9%

April +12.3%

May +6.6%

June +3.8%