Thursday, February 02, 2017

January 2017 Performance

January was a rough month due to my Rite-Aid position. I took another stab at it based on the news that closing was imminent, but now it looks like it will be an eternity before / if it ever closes. I bailed out of my position Rite-Aid (Ticker: RAD) position with a ~ 15% loss. The toughest part of trading / investing is being rationale about losses and just not hope a losing position will come back. Looking back it was the right decision as Walgreen (Ticker: WBA) came back with a cut in the buyout price. If I held on, my loss would have doubled to ~30%+. Obviously, the Rite-Aid position negatively impacted my January performance, resulting in a loss of ~ 4.50% for the month. Actually not bad, considering that I had a relatively large position in Rite-Aid and was down over 10% at one point. The Rite-Aid arb play is definitely one for the books…

I’m entering February with the following special situations / merger arb plays: Ariad Pharmaceuticals (Ticker: ARIA), Actelion (Ticker: ALIOY), Wafergen Biosystems (Ticker: WGBS), and Kate Spade (Ticker: KATE). (1) Ariad Pharmaceuticals – I’m playing this one via short Puts. I see this as a relatively low risk play as Takeda is acquiring the company via a tender offer. Takeda just received anti-trust approval for the deal and everything seems to be falling in place for the completion of the tender offer on February 15th. (2) Actelion – A large deal as J&J is acquiring Actelion for $280 in cash plus the R&D spinout. This deal is anticipated to close by the end of Q2. The price just took a little hit with French regulators recommending to physicians to stop prescribing Uptravi due to patient deaths. I like the risk reward here. (3) Wafergen Biosystems – The company should be announcing Q4 revenue numbers soon, which will determine the final buyout price. So it’s wait and see… Finally (4) Kate Spade – Potentially looking at several strategic acquirers, looking at a price in the low to mid 20’s.

I’m looking at better risk management as Rite-Aid demonstrated my weakness in this area. Looking forward in seeking out profitable special situation plays in the upcoming year...

2017 Performance Year to Date = -4.50% with the running monthly returns as follows:

January -4.50%