Inefficient Market = Free Money

Fear in the market equates to pricing inefficiency. Take a look at Puget Energy Holding (Ticker: PSD), which is being acquired for $30 per share in cash. This deal is scheduled to close next week, February 6th, and there's still a 2% spread! People, this is freeeeeee money!

Roche Going Hostile On Genentech

Roche is going hostile by offering Genentech (Ticker: DNA) shareholders $86.50 per share via a tender offer! My response: Sure, just steal my shares… NOT! What a joke, are they serious or just fooling around? Anyways, any competent Genentech shareholder will not tender their shares to Roche (Ticker: RHHBY.PK) at such a low price. This hostile offer is just to get Genentech’s attention so they can come to the table and negotiate a friendly offer. You can bet that Genentech will strike back. They’re not going to get pushed around by Roche.

Markets Just Keep Slipping and Falling

I reside in the crazy North East where it just snowed and rained. You know what happens after wards... Walking is like skating on ice. Today, the local paper (The Boston Globe) had an image of a guy slipping on ice. This picture reminded me how this market just keeps slipping and falling.

It's The Final Count Down...

It’s the final count down to closing for both Puget Energy Holding (Ticker: PSD) and NDS Group PLC (Ticker: NNDS). Both companies are being acquired for cash (Puget Energy Holding for $30 and NDS Group PLC for $63) and they are expected to close by the end of next week. It looks like this will really be the end of my arb plays unless something compelling pops up. There’s really nothing left out there except for Genentech (Ticker: DNA) and Wyeth (Ticker: WYE). I’ll skip the Wyeth play since there’s not much reward there, but Genentech might be playable if Roche gets its act together. Anyways, I started learning and investing in arb plays for a little over a year and it’s been a very rewarding experience. Now it’s time to start looking into new ways to make money in this crazy and inefficient market.

Less Puget Energy and More NDS Group

Yesterday, I took some Puget Energy Holding (Ticker: PSD) off the table by selling 0.6X and generating a net gain of 6.41% over a ~ 3 week period. I reinvested the proceeds into NDS Group PLC (Ticker: NNDS) at $58.00. Now the table has turned and I see more rewards in NDS Group PLC than Puget Energy Holding.

NDS Group PLC is being acquired by the private equity group, Permira, and News Corp for $63 in cash. This deal should close in early February after the final hearing by the English Court, which is scheduled for February 4th. This is just a formality and Permira has already issued capital call letters to its investors in early January to fund the deal. I see little risks in this deal, but of course anything can happen.

Puget Energy Holding = Done Deal (About Time...)

Puget Energy Holding (Ticker: PSD) finally issued a press release indicating that they plan to close the deal by February 6. This was a bit longer than what I expected, but no complaints from me whatsoever. There were rumors that this deal was about to fall apart, but if you just dug into it a bit more, this was a pretty solid deal. I just kept adding on any weakness. Here are the transactions:

11/14 0.4X @ $25.09
11/19 0.2X @ $26.89
11/19 0.2X @ $26.90
12/31 0.6X @ $27.55
12/31 1.0X @ $27.49
12/31 0.6X @ $27.68
12/31 0.1X @ $27.50
01/02 0.5X @ $27.39
01/02 0.2X @ $27.41
01/02 0.3X @ $27.42
01/02 2.2X @ $27.27
01/02 0.2X @ $27.42
01/02 0.3X @ $27.41
01/05 0.1X @ $27.32
01/06 0.1X @ $27.24
01/07 0.1X @ $27.26
01/08 0.1X @ $27.27
01/08 0.1X @ $27.26
01/09 0.4X @ $27.32
01/09 0.1X @ $27.33
01/13 0.1X @ $27.35

A Good Loss

Back in October 2008, I sold my arb play in Landry's Restaurant (Ticker: LNY) for a nice 32% loss. Now I'm glad that I sold back in October because the deal was called off today. The stock declined 34% on that news to close at $8.16. When you're wrong, you simply have to admit your mistakes and get out.

Now that the market turmoil has returned, my portfolio is holding up well basically due to Genentech (Ticker: DNA) and Puget Energy (Ticker: PSD). I see Genentech gone by mid year at $100+ and Puget Energy should be closing very shortly. Hopefully, these arb plays will serve as a buffer in this crazy market.

$95 for Genentech = Too Low

The Financial Times today reported that Roche was preparing a $95 bid for Genentech (Ticker: DNA). Another low ball bid in my opinion! Genentech will not sell out for cheap. Roche has to go over $100 for me to even consider giving up my shares in Genentech. Roche likes to drag things out, but they will eventually come to their senses and pay up.

JP Morgan Healthcare Conference

It’s time to focus on the JPMorgan 27th Annual Healthcare Conference, which takes place next week in San Francisco. Lots of pharma / biotech companies will be providing preliminary 2009 guidance so keep your eyes and ears open. I’m keeping a close eye on Genentech (Ticker: DNA) and Genzyme (Ticker: GENZ). Genentech reports next week and I’m sure there will be talk about the Roche’s plan to acquire Genentech. Genzyme will be providing a preliminary 2009 guidance. I have holdings in the following biotech companies: Amgen (Ticker: AMGN), Biogen (Ticker: BIIB), Genentech, Genzyme, Life Technologies (Ticker: LIFE) and Qiagen (Ticker: QGEN).

Sold NDS Group PLC and Bought Puget Energy

I sold my arb play in NDS Group PLC (Ticker: NNDS) today generating a gain of 6.84% over a two week period. I have no concerns about this merger, but I saw more opportunities in Puget Energy (Ticker: PSD). I rolled the proceeds from the sale of NDS Group PLC into more Puget Energy. I was a bit quick in projecting that the Puget Energy deal would close in two weeks. More realistically, it will most likely close at the end of January. In any case, I’ll take a 10% return in one month.