Sunday, February 03, 2019

January 2019 Performance

January started out as a bust for me, but for some reason or another came back nicely to finish off the month. The month started with the Apple earnings warning, which was the shot heard around the world. Then a few days later, Constellation Brands reported disappointing earnings and guidance, which sank the stock. I have decent positions in both of these stocks so I definitely felt the pain. I actually added to the Constellation Brands position during the selloff. Sometimes, it’s best to buy when you feel sick to your stomach. In any case, both Apple and Constellation Brands ended up nicely for January. All my other long positions (Alibaba, Mastercard, Qiagen and Visa) performed well in January. Sanofi was the only negative performer.

I’m currently involved in two arb plays: Tesaro and Loxo Oncology. Tesaro was acquired by GlaxoSmithKline for $75 per share in cash. I played this via long stock and short puts. Tesaro recently closed and the short put options were accelerated to February expiration. I also played Loxo Oncology, which is being acquired by Eli Lilly for $135 per share in cash via short puts and this is moving smoothly toward a mid-February close. I was fairly aggressive in both of these merger plays because they were both structured as tender offers and did not anticipate any antitrust issues, which equates to a fast closing.

I have to learn to just sit tight and wait for the right opportunities to show up. Last year, I found myself forcing some bad trades because I felt I had to be in the market.This game is a constant learning experience...

2019 Performance = +7.4% with the running monthly returns as follows:

January +7.4%