October 2017 Performance
October was a mirror image of September as my
larger holdings such as Apple (Ticker: AAPL), Constellation Brands (Ticker: STZ) and Visa (Ticker: V) came back to life.
My short Puts in Kite Pharma finally expired after the successful acquisition
by Gilead (Ticker: GILD). All in all, it was a positive month with the portfolio generating a
net gain of 6.57%.
I am playing things relatively safe for now. I
just entered into a merger arb play in Planet Payment, Inc. (Ticker: PLPM), which is being
acquired by Fintrax Group for $4.50 in cash via a tender offer. This deal
requires only a tender by the majority of shareholders. Management has already
agreed to tender their shares representing 28% of the outstanding shares. The
tender offer is expected to expire on 12/18. I was able to pick up a few shares
of Planet Payment at $4.47 (~ 10% position), which will hopefully result in a
net gain of 0.67% (~ 4.64% annualized return, assuming cash hits my account by
12/22).
Just trying to maintain the gains through the end
of the year...
2017 Performance Year to Date = +42.51% 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%
October + 6.57%
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%
posted by Money Turtle @ 6:35 PM
26 comments
26 Comments:
MT,
Good job for the month of October. Glad to see OCT for your best month of the year. Its a little hard to learn how well (%) you did with KITE Puts mixed in with long positions. Thanks to you I have now been using naked Puts for selected arb plays (ie. KITE, ALR, BRCD) and reaped good simple / annualized profits. We respect your cautiousness as it is your capital at risk. Good M&A arb plays have slowed down some so we need to work harder to uncover any opportunities that may exist. Then of course the rumored pre announcement teasers present themselves recently. CVS v AET, EMR v ROK and AVGO v QCOM. Need to be right, quick and nimble with these plays which means more focused work. We are also looking for clues to see if PFE goes after BMY. The Trump tax cuts for corporate down to 20% and repatriation rate of 12 percent for cash and 5 percent for non-cash should move PFE to do some big deal. The tax bill has to pass both houses and be signed by the President to be certain.
Do you have any thoughts on a potential PFE v BMY deal?
Regards,
Inforesource7
The KITE short Puts contributed to ~ 12% of my gains for October. Regarding PFE going after BMY, I would place a very low probability of a deal, but you never know in this environment. Large pharma deals have generally been a failure and have not created much if any value for the acquirer.
As a former AGN shareholder, Mega mergers are usually crap
Anonymous,
Where have you been? To be honest I am really only interested in capturing any
pre-announcement stock price activity versus the long drawn out approval and closing process. I realize there is more stock price risk as it is pure speculation up until a definitive merger agreement is actually signed. We have to find something to break up the boredom.
Regards,
Inforesource7
I’ve dialed down my risk level quite a bit and just waiting for another KITE type of deal to show up. No need to force yourself into any trades. Merger Pie did some great work on BRCD, which I did not participate.
thanks!..there is just a bit of jittery over the trade due to the broadcom bid on qualcomm...
I'm in MGI suffering.
By the way, why NXTM spread is so hight compared to AKRX for example? the acquirer is always Frenesius german group. Could you analyze those AKRX and NXTM deals? NXTM look really attractive.
I haven't followed NXTM.
AKRX: Jitters on declining biz / fundamentals. I believe the deal gets done. You can't get out of a deal just because the fundamentals of the biz has deteriorated. A declining biz fundamental does not constitute a Material Adverse Event. The acquirer may have buyers remorse, but they are legally stuck to the deal.
cautious regarding MGI... regulatory climate is changing... first with CFIUS increasing scrutiny and now DOJ giving TXW and T a really hard time... i m down on my TWX bet..
i should have listened to myself but i was swayed by news media and other investors tat TWX is a shoo-in..
MT
Thanks for the BABA trade. I was never really convinced in buying it after reading the history of BABA. BUT since you own it for some time I decided to trade some during august and septembber. Somehow IBKR got allocation of SOGOU.com ipo and the only requirement to get the IPO was if you traded Chinese ADR's past 3 months. They just allocated me some shares. Just wanted to thank you for the added bonus for BABA trade. I don't own BABA anymore. hopefully i am able to flip for a decent profit.
Also you usued to own quite a few biotech stocks earlier now, can you explain why you dont own any now except SNY?
Aapltrader
I've cut back on biotechs / pharmas as the macro environment for industry has changed. There are pricing pressures and the regulatory environment has not really improved. The regulatory agency (FDA) makes it very difficult for companies to bring novel therapies to market. It's a tough sector to invest in right now.
I do have a small holding in Sanofi. I just see it as a long term value play. I like their acquisition of Genzyme a few years back and their stake in Regeneron.
All,
Since there have been numerous pre deal (rumor/speculation) opportunities knocking at my brokerage account recently, I have been racking my brain as to how I could profit before any post deal arbitrage sets in. Here are the rumor/speculation targets of my interest hanging out there and my quick thoughts for each.
1) AET by CVS very disruptive (in a good sense) deal idea to combat AMZN and Trump admin. CVS apparently my have offered $200. AET wants a little more and also a stock and cash mix which CVS has agreed to. Both are working to complete a deal by December (end of year or sooner).
AET Intrinsic value is between $206 and $213. If the deal price comes in at or just below these numbers your bet will be safe. Since current stock price of $173 is between $160 and $200 consider playing either a Dec or Jan $175 straddle (buy both sides). This is a heads or tails play and with a straddle you are covered on up or down side.
2) CAVM by MRVL this deal was leaked shortly after AVGO interest in QCOM was announced. Everyone followed the QCOM shing object here. I read both were in advanced talks and thought a potential deal could be announced later in November. This deal is related to what AVGO is trying to do, get stronger. I focused on a CAVM deal at a tad over $80 by playing Call debit diagonal spreads; buy Dec $70 calls, sell Nov $80 calls. November calls expired on Friday, WSJ / reuters reporting pending deal in Sunday evening (11-19) news surprise for $80+ deal coming Monday. Yahoo !!
3) QCOM by AVGO this is complicated by unfriendly AVGO move and pending QCOM NXPI deal flux. This is a real corporate chess match I will just watch this event from the sides lines as I am playing NXPI for a $120 to $125 price bump by QCOM to complete the tender offer. Unless you are very fast trader its tough to determine how to play the QCOM / AVGO volatility.
4) MAT by HAS may end up with a deal here but at what price? MAT has been porrly managed and HAS has been managed very well. Seems like a good match. I am not worried about anti trust issues for toys. No news leak on potential price is a negative.
MAT intrinsic value is $7.50 and is currently way over valued at $18.68. Any play here is high risk due to over value. only HAS knows true value. I am a watcher here.
5) FOXA partial asset sale This was leaked by FOXA in order to bring in all of the interested players, drive up the FOXA value and only involves selling off some assets. Very hard to determine what the impact to FOXA stock price would be after current stock price move up. I am a watcher here.
6) TIME by MDP MDP has solicited the backing of the Koch Bros for an offer of between $17 to $20. If I am not mistaken this is the third attempt at a TIME corporate sale. Did the low depressed stock price finally knock some sense into TIME management to do a deal with MRD?
TIME intrinsic value if between $19.80 and $21.32. TIME current stock price is $16.40. So at current elevated stock price TIME is still under valued and MDP is motivated and has courage with KOCH backing. Considering playing a cluster (many) Dec or Jan call debit spreads $15 / 17.50 or higher if stock price moves up more. MDP was in deal talks with TIME in the past so you have to think alot of diue diligence has already been done except agreement on price. Three times is a charm. TIME do the deal with MDP.
What do you all think? Lets discuss and fire up this blog with some activity, ideas, healthy debate on how to make some money off of any of these events before they are officially announced !!
Regards,
Inforesource7
Nice gain for you on CAVM. I'm looking closely at TIME and may play that one (once again).
MT,
Thanks. I had to exit CAVM calls early this morning due to an appointment away from computer. Lesson leanred, never schedule appointments on Mondays. My position was small (2.5% or port.) and the return was 68.12% over 13 days. You can figure out the annualized numbers. I guess like many I was surprised at the positive reaction by Mr. market and did not expect. As a horizontal merger in tech. that was the key with this deal. The stock price chart over the 14 days told us alot.
The AET price chart looks good for the price size.
The QCOM price chart does not look bad. Once AVGO raises price to $80 QCOM will pop but may not stay up.
The MAT price chart looks good.
The FOXA price chart looks a little choppy.
I forgot to list ROK by EMR yesterday. From what I here there is a major culture clash between cos. EMR CEO wants ROK badly but is over looking cultures. The ROK price chart says it all. Stay away from ROK.
New one today HAIN by Nestle. HAIN chart price has a huge candle wick today = selling pressure and rolling price action going back months. Not good. HAIN current stock price is double intrinsic value. Stay away from HAIN.
The TIME stock chart looks good. Those who played this earlier in the year did not forget the failed deal so they are cautious especially with price up +30%. Another way to play is $16 straddle (buy call and put). Can you imagine if MDP and TIME cannot get this deal done this time? They both will get crushed. I say the deal gets done. Read this NYT article and this excerpt: "Meredith was also among the parties circling Time, Inc. earlier this year before it walked away in part because it could not secure sufficient financing." Fast forward up to last Friday. The KOCH Bros. backing solves this issue.
https://www.nytimes.com/2017/11/17/business/media/koch-brothers-time-meredith.html?rref=collection%2Fsectioncollection%2Fbusiness&action=click&contentCollection=business®ion=rank&module=package&version=highlights&contentPlacement=11&pgtype=sectionfront
With this some of these rumor/speculation targets we have to identify high quality deals and move quickly. Think small precise bets (singles & doubles, not home runs) but add some volume. Nimble is good in a sea of whales.
Regards,
Inforesource7
MT,
I have a correction to a possible TIME option straddle play. I meant the $15 (not $16) strike @ $2.30. It offers a breakeven $12.70 on down side and $17.30 on upside. Monitor large option volume trades over next two days for any tells. Last April when TIME was in play with MDP stock price was at $19. You have to believe deal price this time needs to be close to $19 or higher.
Regards,
Inforesource7
MT and fellow Turtles,
If there are any turtles left out there in arbitrage world, we would like to wish you and your entire family a very Happy Thanksgiving. Be thankful for what you have, not what you do not have. Gobble, gobble. Enjoy the special time and surroundings. Forget about your deal positions until Friday.
Regards,
Inforesource7
Onfosource7: Thanks for the greetings. Best wishes to all!
Thanks Inforesource7! Happy holidays! may we all enjoy another profitable year ahead
MT,
I hope you took a position in TIME this past week. News earlier this evening (Sunday) MDP will buy TIME for $18.50 in cash. MDP is getting TIME cheap but the premium of 46% off of all time lows looks real good to those who are not in the know.
Does anyone have an opinion on whether TIME common will trade above $18.50 tomorrow and/or during the week? Its an all Ca$h deal which we like. Both TIME and MDP common stock prices have trading well after rumor on 11-15-17. I am currently hold the common stock.
I believe AET by CVS deal is next. Very soon.
MAT by HAS is starting to look good even though MAT intrinsic value is lower than current price. I guess combined with HAS, HAS value will be stronger and Mr. market may like that.
Regards,
Inforesource7
Unfortunately, I did not initiate a position in TIME. I just didn't have the strong conviction in the deal for some reason.
Inforesource good work on TIME! but i was bitten once unfortunately... i was bitten 3 times by RAD (very little bites) so I chose to pass too and I was in holiday mood so i wasn't actively seeking any merger arbs now...
MT / Mergerpie,
I can understand. I was bitten hard by RAD as well. Especially when TIME has been to the so called alter before. What I learned through some due diligence is a TIME by MDP merger attempt earlier in the year was mostly due to MDP did not having strong enough financial backing behind it. This time when I read that some of the Koch Bros money was behind the deal I said to myself, three times is a charm, MDP is locked and loaded and the deal will get down. Yes, the TIME common stock price acted cautiously right up to the end most likely due to arbs being bitten in the past. We cannot play all of the opportunities that arise. Just pick and choose and hope the odds of success are on our side. Hang in their fellow turtles.
Regards,
Inforesource7
Can someone explain why TIME is trading above the buyout price of $18.5?
dividend? i can't see another party bidding for TIME
Anonymous,
I believe TIME may have some left shorts who are caught in a very tight stock price vice between $18.40 and $18.60. I would hardly be concerned or even curious why TIME traded up to $18.60. I do not see this as a good arbitrage play going forward as the spread will remain narrow. Like Mergerpie, I see no other bidders coming in. MDP and TIME are made for each other. After Tuesday's stock market rally anybody who was short anything will be getting margin calls. Why did the stock market roar yesterday? Because the U.S. Senate committee working on their version of the tax reform bill passed out of committee. This event sent a strong signal to Mr. Market business tax reform is coming soon.
Regards,
Inforesource7
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