Sunday, April 04, 2021

March 2021 Performance

March was almost a mirror image of February. Slowly grinding back to break even for the year, but still underperforming the market. There were no transactions with my long term holdings and cash remains at ~ 9.5%.  The small / mid cap space is starting to heat up as you are starting to see some of these names popping up on the Investor’s Business Daily (IBD) 50 list. This is where I like to look for new ideas. It’s kind of healthy to see some new names on the IBD 50 instead of the usual large cap tech companies.

I’ve been fortunate to pick up a decent arb play on a monthly basis. In March, I was able to play Five Prime Therapeutics, which is being acquired by Amgen for $38 in cash. I sold the March $30 and $35 Puts with a decent premium. I’m being a bit more cautious with some of these bolt on vertical acquisitions as there is more scrutiny on these deals by the regulators. For example, Illumina’s acquisition of GRAIL just hit a road block. I don’t think the regulators will let Illumina acquire anyone… They already killed Illumina’s deal for Pacific Biosciences last year. The arb game is never easy!

I’m looking for some of my old favorites: Visa, Mastercard and Constellation Brands to break out. Constellation Brands reports on Thursday so we’ll see what happens.

 

2021 Performance = -0.53% with the running monthly returns as follows:


January -2.1%

February +0.6%

March +0.99%

Sunday, February 28, 2021

February 2021 Performance

My under performance continues for a second month as many of my high flyers from last year are taking a breather / correction. Like last year, I continue to be very cautious with this market by maintaining a ~ 9% cash position. My portfolio remains status quo other than the purchase of Airbnb last year. I keep looking for a market correction so I can add to my positions (especially want to buy more of Airbnb). I continue to dabble with merger arb plays and selling out of the money Puts to generate some additional income.

With the merger arb plays, I’m still in Acacia Communications, which should close in the coming week. This was one of those plays that offered an extremely compelling risk reward. All antitrust approvals were received and there is no financing concerns as you have Cisco as the acquirer. As you know I played this via short Puts. I sold as much as I could of the various dated 105 and 110 strikes. As of today, I don’t see any other interesting merger arb plays.

I’ve been focusing my naked Put selling on the weekly options on the most liquid mega cap tech companies. I usually sell the way out of the money puts (10+% out of the money). The premium is not much, but there is a very high probability of expiring worthless. This is still a risky strategy as a black swan movement will vaporize you.

So that is all for now…

 

2021 Performance = -1.51% with the running monthly returns as follows:

January -2.1%

February +0.6%

Monday, February 01, 2021

January 2021 Performance

Well, I started January with a nice little loss of 2.1%. My long holdings remained constant (Apple, Airbnb, Alibaba, Mastercard, Qiagen, Sanofi, Constellation Brands and Visa) with cash remaining at ~ 9%. Of all the companies in my portfolio, I see the biggest potential upside in Constellation Brands. The catalyst I see with Constellation Brands is the passing of a cannabis legislation to legalize use at a Federal level later this year. I really did not expect any significant legislation for several years out, but with the Democrats in control of the Senate, this may become a reality.

Now back to the merger arb space. Tiffany finally closed in January and my Short Put positions paid off nicely. I just initiated a position in Acacia Communications, which is being acquired by Cisco for $115 in cash. All antitrust approvals have been received so it’s just a waiting game for the shareholder vote. I’m playing Acacia via Short Puts.

Even though it’s a new year, I’m going to follow my same old strategy of holding strong to my long positions and supplementing additional income from the merger arb plays & selling way out of the money options.

That is all for now…

2021 Performance = -2.1% with the running monthly returns as follows:

January -2.1%

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%