September 2017 Performance

September was a bit challenging as many of the growth stocks in my portfolio generated flat to negative returns. One of my larger positions is Apple (Ticker: AAPL), which was down ~6% and other large positions such as Constellation Brands (Ticker: STZ) was down slightly and Visa (Ticker: V) was only a slight positive. The growth stock portion of my portfolio was a big drag this month.

What saved the month was the merger arb play in Kite Pharma (Ticker: KITE), which is being acquired by Gilead (Ticker: GILD). I pretty much went all in via short Puts and this deal is on track to be completed next week. I really liked this deal as it was structured as a tender offer, which equates to a quick regulatory review and close. I also generated some small gains in Rockwell Collins (Ticker: COL) and Alere (Ticker: ALR). It’s nice to see the special situation / merger arb activity picking up.

I continue to be very cautious in this market environment, but will aggressively pounce on high probability merger arb / special situation plays.

2017 Performance Year to date = +33.72% with the running monthly returns as follows:

January -4.50%
February +10.18%
March +5.1%
April +4.34%
May +5.67%
June +1.34%
July + 2.76%
August + 4.81%
September + 0.48%

Rockwell Collins & Kite Pharma Update

I sold my shares in Rockwell Collins (Ticker: COL) this morning generating a net gain of ~1.5% over a 7 day period. The equity component of this transaction was higher than what I had expected. I didn’t want to hang around to the end with this one.

Gilead’s (Ticker: GILD) transaction of Kite Pharma (Ticker: KITE) appears to be ahead of schedule. Gilead commenced the tender offer today with the tender expiring on October 2^nd. I sold some more Puts today.

August 2017 Performance

All in all, the portfolio generated a net gain of 4.81% for the month. The positive result for August was primarily attributed to Apple (Ticker: AAPL) and Alibaba (Ticker: BABA), which both gained over 10% for the month. My other positions: Constellation Brands (Ticker: STZ), MasterCard (Ticker: MA), Visa (Ticker: V) and Sanofi (Ticker: SNY) gained between 3 to 4% for the month. The only loser was Qiagen (Ticker: QGEN), which generated a loss of ~ 2% for the month. I also generated some small gains in the following merger arb plays: Scripps Network Interactive (Ticker: SNI) and MRV Communications (Ticker: MRVC).

I did enter two special situation plays recently: Rockwell Collins (Ticker: COL) and Kite Pharma (Ticker: KITE). Rockwell Collins is currently being targeted by United Technologies (Ticker: UTX) with a rumored price around $140. I have ~ 9.5% position in this play and looking to a definitive agreement soon. Kite Pharma agreed to be acquired by Gilead Sciences (Ticker: GILD) for $180 per share in cash. This deal is structured as a tender offer with a potential close in the second week of October. I am playing the Kite Pharma deal via short long dated Puts.

I continue to be on the defensive with a cash cushion. I start to worry when individual investors start piling into the market as observed in the new account openings at discount brokerages. And the fact that I am doing this well is a big warning signal!

2017 Performance Year to date = +33.08% with the running monthly returns as follows:

January -4.50%
February +10.18%
March +5.1%
April +4.34%
May +5.67%
June +1.34%
July + 2.76%

August + 4.81%