March 2016 Performance

Not really much to report…

March was one of those months where it didn’t feel like the market really rallied at all. The biotechs continued to get hammered and was not able to participate in this rally. I was surprised that my portfolio was able to generate a ~ +7.5% return for March, which can be partly attributed to the closing of Keurig Green Mountain. Many of my long term positions such as Visa (Ticker: V) and Constellation Brands (Ticker: STZ) rebounded from the January / February lows. I did take a small hit on my Alere (Ticker: ALR) short Puts and my position in Vertex Pharmaceuticals (Ticker: VRTX).

In terms of my merger arb plays, I currently have short Puts on ADT (Ticker: ADT), Youku Tudou (Ticker: YOKU) and Qihoo 360 (Ticker: QIHU). I anticipate Youku Tudou and Qihoo 360 closing in April. Hopefully, these short Puts will expire worthless.

So I’m still playing things very conservatively…   

2016 Performance Year to Date = -1.93% with the running monthly returns as follows:

January -5.47%

February -3.50%

March +7.51%

Some Virgin America

I initiated a position in Virgin America (Ticker: VA) at an average price of $37.68 (~ 12% position). It looks like JetBlue Airways (Ticker: JBLU) and Alaska Air (Ticker: ALK) are bidding for the company. I like these types of scenarios in which you have strategic bidders (versus financial bidders). According to Bloomberg, a deal may materialize next week with price talk in the 40s. So we’ll see…

Edit: I took my profits in Virgin America this morning (03/29) at $38.05 generating a net gain of ~ 1% over a 2 day period.

Closed Out Alere

You can’t be 100% perfect in this risk arb game. There was news this morning on Alere (Ticker: ALR) in which the company received a grand jury subpoena from the DOJ for their sales practices in Africa, Asia and Latin America. Abbott (Ticker: ABT) is acquiring Alere for $56 per share in cash. I initiated a short Put position (sold the August 2016 Puts for $1.00) on 2/1/16 and I closed out my position today by buying back the Puts at $2.85. That was a nice 65% loss, fortunately this position made up only 0.7% of my portfolio. I really cannot quantify the risk of this investigation by the DOJ. Sometimes, you just need to step away and re-evaluate…

Keurig Green Mountain = Done Deal

JAB announced the closing of Keurig Green Mountain this morning. This position made up ~ 30% of my portfolio with a good chunk of common and Short Puts. I was able to generate a net gain of 2.32% (annualized gain of ~ 30% assuming the cash hits my account by 03/11). I was pleased on how smoothly this arb position played out. I took advantage of yesterday’s volatility as the weak hands got shaken out on one of those pre-closing rumors.

February 2016 Performance

The January volatility carried into February and navigating through this market has not been easy. You have to be nimble and take profits whenever you can. The merger arb plays have continued to help me buffer this market volatility. Solarwinds was able to close in February and Keurig Green Mountain (Ticker: GMCR) is anticipated to close early March.

I’m doing some work on a few Chinese going private plays and looking to initiate some positions after the completion of Keurig Green Mountain. Talking about Keurig Green Mountain, the stock took a little hit today on no news. Keurig Green Mountain is anticipated to close any day now so I added to my position at $91.61.

I see this volatility continuing into March so the fun continues…

2016 Performance Year to Date = -9.12% with the running monthly returns as follows:

January -5.47%

February -3.50%