Saturday, September 29, 2018

September 2018 Performance

September turned out OK considering that I puked out my Short Put position in Rent A Center (Ticker: RCII). As you know Rent A Center is in the process of being acquired by Vintage Capital. Vintage Capital is a private equity firm and also holds a majority stake in Buddy’s Home Furnishing, another rent to own biz. Even though there are overlap between many of the Rent A Center and Buddy’s store locations, I did not believe the FTC would issue a Second Request. Buddy’s only has ~ 300 stores and retail is already a highly competitive sector. The FTC is clearly zeroing in on the type of customers that rely on these rent to own biz, which I find a bit surprising. Second Request is time consuming and the eventual outcome may result in the FTC rejecting the deal. I don't have a good fuzzy feeling with Rent A Center.

The long positions continue to perform well with VISA (Ticker: V), MasterCard (Ticker: MA), Constellation Brands (Ticker: STZ) and Sanofi (Ticker: SNY) generating positive gains for September. While Alibaba (Ticker: BABA), Apple (Ticker: AAPL) and Qiagen (Ticker: QGEN) delivered negative returns. 

There’s been a lot of recent IPO activity and I decided to enter the IPO game. I was able to get allocations in a few shares of Elanco (Ticker: ELAN), Eli Lilly’s (Ticker: LLY) animal biz spin off. I really like these spin off plays as these companies are often run inefficiently and being public allows these companies to really flourish. Seriously, who came up with the awful name: Elanco!?

Now onto my merger arb plays… Still have Short Puts in CA Technologies (Ticker: CA) and SodaStream (Ticker: SODA). I can see CA Technologies closing by the end of October if the EU gives their blessing. SodaStream looks on track with the HSR decision coming soon. SodaStream still requires a number of regulatory approvals so an early 2019 closing is likely. The second half of the year has been very challenging with the merger arb plays… definitely not for the faint of heart.  

I’m just looking forward to the upcoming earnings release on October 4th from Constellation Brands. I believe the earnings should be fine with the Mexican beer biz continuing to perform well. We’ll see soon…

2018 Performance = +19.75% 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%
September -0.60%