Friday, August 31, 2018

August 2018 Performance

August turned out be a wild ride. I was quite surprised that my portfolio was still able to generate a healthy return with Constellation Brands (Ticker: STZ) taking a hit with their investment in Canopy Growth (Ticker: CGC) and my failed arb play with iKang Healthcare Group (Ticker: KANG). I guess a little diversification does help as Apple (Ticker: AAPL), MasterCard (Ticker: MA) and VISA (Ticker: V) delivered strong returns during the month.

So obviously the big news is the $4 billion equity investment in Canopy Growth by Constellation Brands. They are certainly going all in with weed and they definitely paid a high high price. The market didn’t like the news and the shares promptly declined to ~ $200. Constellation Brands will be taking on significant debt to finance this investment and there will be execution risk as the market is not well defined. I take a long term view in Constellation Brands and do believe this investment will pay off. They will be essentially creating new markets from beverages to consumables. We’ll get a glimpse of this market as Canada legalizes recreational weed use in October. I’ve been waiting patiently to add to Constellation Brands and this was the opportunity I was waiting for.

I did try to get cute with playing iKang Healthcare as a merger arb play and promptly blew up on me as a large percentage of investors are seeking appraisal rights. Now it’s up to the courts to determine a fair price for these particular investors. The parent can now call off the deal if they determine that the price they have to pay is too high. This will likely close, but I’m not comfortable with the risk. Regarding other merger arb plays, I’m currently involved in Rent A Center (Ticker: RCII), CA Technologies (Ticker: CA) and SodaStream (Ticker: SODA) via options.

That’s a wrap for August…

2018 Performance = +20.47% with the running monthly returns as follows:

January +2.80%
February +2.82%
March -0.03%
April +2.10%
May +6.25%
June -1.51%
July +1.53%
August +5.1%

Edit: Updated August numbers after reviewing brokerage statement (calculating value of outstanding options can be tricky sometimes).


At September 14, 2018, Anonymous Anonymous said...

rcii second request...

At September 14, 2018, Blogger Money Turtle said...

Yeah, I was not expecting a second request. It looks like the FTC is focusing on a narrow consumer population. I would have thought this was a very competitive market with many stores now offering rent to own options. I looked at all of geographic locations (comparing each stores zip code) between Buddy's and Rent A Center. There is definitely a ton of overlap between these two stores. Based on what I saw, there is potential for significant divestiture to get this deal through. I exited my position today at a loss as the risk profile of this deal has changed.

At September 18, 2018, Anonymous Anonymous said...

ATHN just got interesting...

At September 18, 2018, Blogger Money Turtle said...

ATHN: A lot of drama going on with that one. What concerns me is that the strategic buyers don't seem be to interested.


Post a Comment

<< Home