Thursday, August 01, 2013

Sprouts and Some Recent Trades

I received a small IPO allocation in Sprouts Farmers Market (Ticker: SFM). I was expecting a nice pop, but nothing like the + 120%. I’ll probably just hang onto the shares and see what happens down the road. We don’t have Sprouts Farmers Market up here in the East Coast, but people have described it as a cross between Whole Foods Market (Ticker: WFM) and Trader Joe’s. I can see this company just duplicating its success state by state as it expands. I do like this concept and clearly the market has very high expectations for this company.

I sold my position in Onyx Pharmaceuticals (Ticker: ONXX) today and essentially breaking even. I wanted to free up a little bit of cash. I’m short the August 120 Puts, which I’ll probably hold into expiration to collect the premium. It's hard to say who will eventually get Onyx, but if I were to choose I would have to say that Amgen (Ticker: AMGN) is the one. Amgen's portfolio is a bit dated with the old drugs still carrying the company. They need something quickly to fill their pipeline and Onyx will provide some nice products that can fill the gap. How much? I'll probably guess $140 - $150 will get the deal done. 

I’ve been adding to my positions in Biogen Idec (Ticker: BIIB), Vertex Pharmaceuticals (Ticker: VRTX) and VISA (Ticker: V) during the recent sell offs. These are some of my longer term holdings and the recent weakness in these stocks was a perfect buying opportunity.

What else… I closed out my merger arb plays in Life Technologies (Ticker: LIFE) and BMC Software (Ticker: BMC). I used the proceeds to initiate a position in Spreadtrum Communications (Ticker: SPRD). Spreadtrum Communications is being acquired for $30.95 ($31 minus the $0.05 ADR fee). Spreadtrum Communications is one of those China takeover plays that carry a high spread due to the China discount. There’s a good chance that this deal closes by the end of September, which will equate to a + 20% annualized gain. At this point in time, I view Spreadtrum Communications as a better merger arb play than Life Technologies and BMC Software.


At August 05, 2013, Anonymous Anonymous said...

Hi MT,

Have you looked at iSoftStone Holdings Limited (ISS)?

This too is a Chinese comapny trading at a large discount to the takeover price.

Do you think this deal is likely to go through?

Your comments would be appreciated.

At August 05, 2013, Blogger Money Turtle said...

Yes, I have looked at ISS and have traded in and out of it. There's no definitive agreement yet as the special committee is evaluating the offer from management. They will probably accept the offer, but from my experience it can take a long time for the special committee to make their decision.

At September 04, 2013, Anonymous Anonymous said...

Hi MT,

I see that the shareholders approved of the takeover today. When do you think it will close.

At September 04, 2013, Blogger Money Turtle said...

I wouldn't be surprised if we close in a week. The big question mark is the receipt of the approval from the PRC regulatory agencies. Did the company receive approvals already? If so, this is done in a week.

At September 07, 2013, Anonymous Anonymous said...

The news release said "Completion of the Merger remains subject to the satisfaction or waiver of various conditions set forth in the Merger Agreement, including antitrust clearance and other PRC regulatory approvals." It did not say how long these things should take.

At September 07, 2013, Blogger Money Turtle said...

We need to know when they filed or when the PRC accepted the filing for review. Once we have that info, you can have a good estimate of the potential closing. They certainly do take their time with reviews.


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