October 2015 Performance

When I calculated my return for October, I thought I made a calculation error. Everything kind of clicked… The growth stocks and merger arb plays performed well. I’ll take it...

In terms of the growth stock portion of my portfolio, Constellation Brands (Ticker: STZ) once again delivered solid earnings and is trading near its highs. This is also my largest holding making up ~ 26% of my portfolio. Other companies such as Visa (Ticker: V) and MasterCard (Ticker: MA) have also performed well and are also at new highs. And don’t forget about the biotechs such as Vertex Pharmaceuticals (Ticker: VRTX) and Regeneron (Ticker: REGN), which made a nice little bounce from the recent biotech sell off.

The merger arb plays are holding steady gains. The only position that closed in October was Dealertrack. I was fortunate enough to get in the day before the regulators approved the deal. That was just plain luck! I also traded aggressively around some of the pre-merger plays such as Molson Coors (Ticker: TAP), SanDisk (Ticker: SNDK) and Maxim Integrated Products (Ticker: MXIM). My current merger arb portfolio is made up of the following: Altera (Ticker: ALTR), AirMedia (Ticker: AMCN), BioMed Realty Trust (Ticker: BMR), Integrated Silicon Solution (Ticker: ISSI), WuXi Pharmatech (Ticker: WX) and Rite Aid Pharmacy (Ticker: RAD).

I’ll be keeping a close eye on Integrated Silicon Solution next week (CFIUS decision due by November 2^nd) and looking forward to the closing of WuXi Pharmatech sometime in December.

2015 Performance Year to Date = +29.68% with the running monthly returns as follows:

January +3.4%
February +7.03%
March -0.33%
April +0.39%
May +5.59%
June -1.2%
July +5.48%
August -0.89%
September -4.89%

October +12.90%

Sold Some ISSI and AMCN

I sold some more Integrated Silicon Solution (Ticker: ISSI) today at $22.59 (net gain of 3.89% / 28.86% annualized) bringing down my position to ~ 7% of my portfolio. I’ll hold the remaining position through the CFIUS decision. It’s all about risk management… I don’t want a blow up in a security to vaporize my portfolio. I’ve experienced that once before and I never want to experience it again.

I also liquidated my position in AirMedia Group (Ticker: AMCN) today at $5.48 generating a small gain of 0.37%. It’s still early for this arb play so looking to re-enter at a lower price.

Some Random Thoughts

I have a great deal of respect for most Research Analysts as it is not an easy job. But when I see a headline such as “SanDisk (Ticker: SNDK) stock price raised to $86.50 from $63 at Stifel Nicolaus”, I scratch my head. Is this really necessary? Just a waste of time to put this out and for someone to actually read this…

Ok, enough of my gripes!

What I actually wanted to write about is the dangers of shorting naked Puts. Back in February I sold some naked Puts (January 2016 $170) for $13.60 on Valeant (Ticker: VRX) after it agreed to acquire Salix. At that time, I thought the acquisition would help boost Valeant stock price and would be relatively easy money. Fortunately I closed out the position a few months later with a small gain, but I would be looking at a nice fat loss if I held onto the position. Those same Puts are currently trading with a bid of $77.50 / ask: $80.60. Another lesson on not to be too greedy…

Sold SanDisk

I sold my position in SanDisk (Ticker: SNDK) this morning at $78.33 on news that it is being acquired by Western Digital (Ticker: WDC). I was able to generate a net gain of 2.28% over a two day period. I had no intention to hold this one until closing. The companies are guiding for a Q3 2016 close, which is an eternity for a merger arb play. I did not find the annualized gain over this period to be attractive. It was time to move on...

WuXi Update and Some SanDisk

The definitive proxy for WuXi Pharmatech (Ticker: WX) was filed today with a shareholder vote scheduled for November 25^th. Everything is on track with the company guiding for a Q4 close.

I took a stab at SanDisk (Ticker: SNDK) today at $76.58 (~16% position). I know I’m a little late to this one. Bloomberg has reported that the company is in advanced discussions with Western Digital with price talk of $80-90. It looks like a deal will likely occur…

Edit: I re-entered my position in AirMedia (Ticker: AMCN) today at $5.45 (~3.3% position).

Some Minor Portfolio Adjustment

I tweaked my China merger arb holdings a bit today. I took a little bit off the table in Integrated Silicon Solution (Ticker: ISSI) by reducing the holding to ~ 15% from ~20% of my portfolio. I sold some Integrated Silicon Solution at ~ $22.55 generating a net gain of ~3.5% (~27.90% annualized gain). I added to WuXi Pharmatech (Ticker: WX) at $44.15, which now make up ~ 20% of my portfolio. Finally, I exited my small position in Airmedia Group (Ticker: AMCN) at $5.49 generating a net gain of 1.83% (annualized gain of ~36.6%).

More WuXi Pharmatech

I added to my position in WuXi Pharmatech (Ticker: WX) today at $44.01, which makes up ~ 16% of my portfolio. My average price is $43.60 with a potential net gain of 5.40% (15.67% annualized assuming a 12/31 close).  It looks like everything is on track and should see a Definitive Proxy soon. I’ll continue to build this position with the right price.

September 2015 Performance

September is basically another repeat of August. There were no merger arb positions closing in September to give my portfolio a boost. I’ve positioned to take advantage of some anticipated merger arb closings in Q4 such as WuXi Pharma Tech (Ticker: WX), Integrated Silicon Solution (Ticker: ISSI) and Dealertrack Technologies. I also have some pre-deal special situation plays such as Molson Coors (Ticker: TAP) and BioMed Realty Trust (Ticker: BMR). I believe the merger positions will help buffer my portfolio during this volatility (unless there’s a blow up).

Just trying to be patient in this market environment and not to over react...

2015 Performance Year to Date = +14.86% with the running monthly returns as follows:

January +3.4%
February +7.03%
March -0.33%
April +0.39%
May +5.59%
June -1.2%
July +5.48%
August -0.89%
September -4.89%


Edit: I sold my position in Molson Coors today to reduce my equity exposure.