Thursday, January 02, 2020

2019 Year End Review

I was expecting 2019 to a be flattish to down year based on the market action in the end of 2018. I maintained a conservative stance with ~ 15% cash through the year. I did not expect to generate a ~ 40% return in 2019. It was a buy and hold year with no changes to my holdings. I did take advantage of some merger arb plays, which contributed to ~ 6.25% of the total returns. I was able to generate some alpha from the merger arb plays. All in all, I was very pleased with this performance and hopefully I can continue to generate positive returns in the future.

So, what worked in the long portfolio… Apple (Ticker: AAPL), Alibaba (Ticker: BABA), Mastercard (Ticker: MA) and Visa (Ticker: V) generated market beating performance. Apple’s performance just blew me away, which was a nice surprise. The laggards in my portfolio were Qiagen (Ticker: QGEN), Sanofi (Ticker: SNY) and Constellation Brands (Ticker: STZ). Hopefully, these laggards will make a comeback in the new year. I currently have no plans to make any changes to this portfolio.

Moving onto the merger arb space. There were just three arb plays that contributed to most of the returns in this space. The companies were Loxo Oncology, Spark Therapeutics and Tesaro. Tesaro was the biggest contributor and got me in a big bind. I went big in Tesaro with common and short Puts. After building my position in Tesaro, my broker suddenly decided that my position was too much of risk for them and had reached the “Point of No Return”. I had to close out a bunch of the options positions at the last minute, which cost me some $$$. I was not pleased as they waited awhile before issuing this margin call (long after building up the position). So maybe time to look for a new broker in the new year.

In 2020, I’ll continue to maintain this conservative tilt with a cash position of ~15%. I don’t see much value in this market except for the energy sector. I’ve always been intrigued with the oil services sector as you are starting to see some going bankrupt. Maybe a good time to nibble on some of the potential survivors. I don’t care what people say, but we’ll always need oil.

I guess that is it for my 2019 review. It’s boring as not many trades were executed. Hopefully, I’ll come up with some profitable ideas in 2020.

As always… Have a Healthy and Prosperous New Year!

2019 Performance = +40.17% with the running monthly returns as follows:

January +7.4%
February +3.7%
March +5.06%
April +7.15%
May -7.90%
June +8.2%
July +1.53%
August +1.88%
September +1.00%
October +1.12%
November +4.75%
December +2.9%

Annual performance for the past eight years is as follows:

2012 +61%
2013 +44.61%
2014 +29.47%
2015 +33.48%
2016 +14.61%
2017 +42.12%
2018 -4.11%
2019 +40.17%

CAGR from 2012 to 2019 = 31.26%