Thursday, May 05, 2016

April 2016 Performance

April was another challenging month with many of my long term positions heading south such as Apple (Ticker: AAPL) and Vertex Pharmaceuticals (Ticker: VRTX). The only bright spot was the closing of ADT in which I short a bunch of Puts and the continued strength of Constellation Brands, which has now grown to ~ 30% of my portfolio. I still managed to pull off a gain of +0.84% for the month of April.

I started to de-risk my portfolio by closing out my short Put position in Qihoo 360 (Ticker: QIHU) generating a loss of 33.13%. Something just doesn’t feel right so I decided to get out. I had an oversized position and didn’t want to risk a blow up. Short Puts is generally a very profitable strategy, but a blowup will vaporize you. This was observed in Alere (Ticker: ALR) in which I was able to get out early and prevented substantial losses from building up. So with short Puts, I will try to close out my position quickly if the position turns negative.

I also closed out my position in Sparton Corporation (Ticker: SPA) generating a loss of 7.56% as this hit my loss limit. I will re-evaluate…

The most important rule I keep in the back of my mind is to manage losses. Taking profits is the easy part…

I continued to add to my Medivation (Ticker: MDVN) position, which currently makes up ~ a 9% position and looking to add on any pull back. It looks like Sanofi (Ticker: SNY) is using the Genzyme play book, but the difference with this one is that you have a bunch of other companies: AstraZeneca (Ticker: AZN), Pfizer (Ticker: PFE), Novartis (Ticker: NVS), Amgen (Ticker: AMGN) and ???) interested in Medivation. With the Genzyme acquisition, there were no other interested parties so Sanofi had all the leverage to negotiate an attractive price. I can see Medivation getting top dollar in a sale…  


2016 Performance Year to Date = -1.10% with the running monthly returns as follows:

January -5.47%
February -3.50%
March +7.51%
April +0.84%

19 Comments:

At May 05, 2016, Anonymous Anonymous said...

What are your overall portfolio objectives? While I like the story at STZ, a position that large in a relatively well understood story seems rather extreme

 
At May 05, 2016, Blogger Money Turtle said...

My objective is long term growth with short term income from special situation plays.

I still like Constellation Brand’s story. I initiated the position ~ 3 years ago (cost basis in the 40’s) after they acquired several brands (Corona, Modelo Especial, etc…) from Grupo Modelo. The position just grew and grew solely based on the appreciation of the stock. It’s buying and holding where you make the real money stocks and this is one of those cases. I still see catalysts that can drive up the value such as dividend increase / buyback, ramp up of the manufacturing facility and the potential spin off of the Canadian wine biz. I can still see myself hanging onto Constellation Brands for a while…

 
At May 06, 2016, Anonymous Anonymous said...

Shares of many U.S. listed companies that have entered into non-binding going private offers over the past year are trading lower on Thursday. For example, shares of Momo Inc (ADR) (NASDAQ: MOMO) were trading lower by more than 4 percent, as were shares of YY Inc (ADR) (NASDAQ: YY). Other China-based companies saw smaller losses, such as 21Vianet Group Inc (NASDAQ: VNET) and E Commerce China Dangdang Inc (ADR) (NYSE: DANG). All of the previously mentioned companies have either received non-binding going-private offers or have reached definitive agreements to go private. Related Link: Something Shady Is Going On With U.S. Listed Chinese Companies According to Geo Investing, a news report surfaced in Chinese media that has not been disseminated by western media sources. Geo Investing cited a report from Tencent Finance, which stated that there is a rumor that the China Securities Regulatory Commission will postpone the relisting of the "ChinaHybrids" that have been taken private or plan to go private. "Specifically the article rumored that a relisting in China through buying a shell company, a restructuring process or IPO might be restrained," Geo Investing noted.

 
At May 06, 2016, Anonymous Anonymous said...

if US market and China come down in the next few days seen the -3% of this nigh in China, we can see some nice interesting opportunity on QIHU and YY.

in which of the two you would risk? YY is even investigated now like illegal site. But QIHU has different business, if we see QIHU over 10% yeld could be really nice to buy it. at the end you are buying a normal stock if will fall.

 
At May 06, 2016, Anonymous mergerpie said...

good call on qihu...it is always prudent to take some loss to reduce risk..

I gave up on perrigo when I saw the horrendous earnings report last month...generating a sizable loss. My CVC position is still alright though..heading for closing end of may...

I may take a small position in qihu if it goes near 70..giving a nice 10% arbitrage.

 
At May 06, 2016, Blogger Money Turtle said...

QIHU is so far in the process, it's hard to imagine that the deal will be terminated at this point. But with Chinese plays, anything can happen...

 
At May 09, 2016, Anonymous Anonymous said...

China index are turning here, CSI300 and some other asian index clear sign of bearish trend now, if in the next days come down the chinese stock exchange we can see nice volatility. QIHU as much more downside than YY. I would prefer to monitor YY then QIHU, even quote 70 will be not a sufficient psicologycal support. I wait YY around 42.5/42 area. QIHU too far from bargain prices, so really hard that play now if anything can happen....... I prefer YY, LXK, IM high yeld plays.

 
At May 09, 2016, Anonymous Anonymous said...

It is amazing how QIHU is tanking. Are there any concrete news stories that can explain this? Is this unjustified fear that is creating a buying opportunity, or is the deal falling apart?

 
At May 09, 2016, Blogger Money Turtle said...

The problem is that there's a news vacuum where no one really knows what the rules are. The mentality is sell now and ask questions later...
The sell off on big volume is definitely a concern.

 
At May 09, 2016, Anonymous Anonymous said...

just news, who is buying in M&A is companies that will have P/E below 10/8 in few years... QIHY and YY are example, I like more YY. QIHU if they panic could drop even more.
But if exit the news... it's yeah a 10/15 jump in a day. We will see. I prefer to see a China stock index down together with them, but, they are going alone so we have to bet the right timing to enter... as I was thinking they was going to drop much more below 70... we are below 64, soon may be we can find the bottom because of the value of the company. But YY still seem more safe and near to supports like the area 42. While QIHU I would wait a real crash to 45 area, or here may be it's already the bottom, it's on the 1 year average, 64 area will be quite hard to destroy.

 
At May 09, 2016, Anonymous mergerpie said...

in china, the rules can be enforced within one day so its a big risk. pple are selling down in panic but i do see some opportunities.

 
At May 09, 2016, Anonymous Anonymous said...


Qihoo 360 denies preconditions for mainland IPO

http://www.ecns.cn/business/2016/05-09/209685.shtml

Apparently the companies denial has not stopped a panic exit from the stock.

 
At May 10, 2016, Anonymous Anonymous said...

in pre-market are rebounding QIHU and YY. But with low volume... with the billion USD traded yesterday a lot of interests now to keep the price up... making average, so for now still prudently I would wait a final test of the yesterday low, if we see a turtle soup pattern... and to fail to make significant new lows I would enter, since the risk is really like, because, if some bad news will exit we can see qihu again to 40/42.50 USD area, for a 20% profit if deal close. So this area is still risky and however who have not bought yesterday... is already in late. I had a very good support at 64.60 so I should enter when I have seen prices below 64.6 but I didn't, just because of those market still on top (Us indexes). If we have a chinese index falling... was more interesting, but if you enter today and stock go up 5% and then tomorrow CSI300 or A50 index in China go down -5% you are again in trouble. So I have to take care of the risk the market can turn bearish again here and QIHU/YY could suffer new pressure with the lack of liquidity. Bytheway, now is 68.3 so it's already 4.3$ rebound over 6/7%.

 
At May 10, 2016, Anonymous Anonymous said...

here in China they publish news... on so big and important listed companies and we do not see in English, that's the problem. Today are up 5% already and for sure they published already some report on web or tv.. so we are in late just for this. May be. But if we are lucky, when the market open with liquidity we can re-test the low, hard.. but who knows, and there we have to have courage to decide if enter or not. Would you enter with 50% of your capitals to 64 after a rebound to 68.5? :)

 
At May 10, 2016, Blogger Money Turtle said...

I wouldn't risk 50% of my capital on the China plays. One wrong move and it's game over for you...

 
At May 11, 2016, Anonymous Anonymous said...

QIHU and YY are safe play at 5 years from now, are growth stocks in 5 years they will be P/E 5 at the actual price (YY) and P/E 10 at least QIHU, so I consider that, and I increase my profits. Specially when you can make a swing trade like the day hitted 63.90, that was an opportunity. But it's ok. I want to risk :)

 
At May 11, 2016, Anonymous Anonymous said...

btw YY -11%, waiting QIHU again to test 64.50 area at least, we will see if today will be able to follow YY crash.

 
At May 12, 2016, Anonymous Anonymous said...

Hi MT,

So it seems that YY's going private transaction is "off the table" for now. QIHU is reported to having regulatory issues of converting the Yuan to USD in order to complete the takeover. However, based on the price it seems there is still a strong possibility the transaction will eventually get done.

What I find interesting is that the price of YY is close to its 52 week low and is lower than it was prior to the Going Private Transaction was announced. Do you think the current selloff has created a buying opportunity?

Also, DATE seems to be holding up relative to the others, but the deal should have been completed already. Do you think it is at risk as well, or do you expect the deal to completed? How long do you think it will take for the deal to be completed?

Thank You

 
At May 12, 2016, Blogger Money Turtle said...

See my recent post on DATE. Should be completed on Monday, 5/16.

 

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