Portfolio Update Dec. 17

The last few weeks have been rich in market action. Looking back to some of the trades and updating the portfolio page.

On November 8th, I bought Accuride Corporation (NYSE:ACW) in the depth of the stock market drop that followed the result of the US presidential election. I had noticed that the only milestone missing for the completion of the private equity buyout by Crestview Partners was a shareholder vote on November 15th, which I did not see as an issue. I got in at US$2.42/share, and the deal was completed on November 18th for US$2.58/share, or 10 days after my initial investment. This must be one of my best trades of 2016. I looked to add to my position, but the price went up too fast when markets convinced themselves that a Trump presidency will be good for the economy. Return: 6.6% over 10 days; annualized return: 241%.

On November 16th, I traded the Farmland Partners (NYSE: FPI) / American Farmland (NYSEMKT: AFCO) all-stock merger. I estimated that a closing could occur as early as late January and the spread was of 8% (64% annualized), based on a short fee rate of 20% on FPI. However, I had to close this trade on November 28th, after the cost to borrow FPI’s shares stayed over 50% for a few days, which would have eaten into the spread over time. Return: 1.8% over 12 days; annualized return: 55%. I haven’t looked into this one since, but it seemed like everything was well aligned for the deal to pass. The short fee rate is down at 27%, but now that I know how it can be markedly higher for long periods of time, I am refraining to commit more capital to this one.

Also on November 16th, I invested in TeamHealth’s shares (NYSE: TMH). The company is being acquired by Blackstone, for a price of US$43.50/share, (traded at US$42.50 at the time of trade, currently at US$43.00). The process run was very solid as described in the proxy filed with the SEC (see “Background of the Merger” section). 50% of the float is held by institutions or insiders, who are all likely to vote in favor of the transaction. I am still invested in TeamHealth’s stock at this time.


Finally, I have been accumulating the stock of Synutra (NASDAQ: SYUT) since the last week of November. As one of the readers of this site put it, this deal is similar to the eFuture (NASDAQ: EFUT) go private deal, which I talked about in a previous post. The deal will pay US$6.05/share (US$5.25 at time of investment, US$5.45 currently) when it closes probably some time in February; that’s a return of 11% or 87% annualized). While the acquiror already owns 63.5% of Synutra’s shares, it’s important to note that, as opposed to eFuture’s shareholders vote, the Synutra deal has a majority of the minority vote condition (meaning the majority of the shares not held by the acquiror also needs to vote in favour of the merger). That being said, this should not be a problem given the premium of 60%+ paid to the shareholders. I am still long Synutra’s shares at this point. Also to note that while the size of the deal is below the $1 billion threshold that usually attracts Chinese regulator scrutiny for capital control purposes, the market cap. is US$300+ million, 10 times higher than eFuture’s.

 

I am in the process of reviewing a couple of additional opportunities that I will be posting about over the next few days, should the analysis be conclusive. Feel free to mention the deals you’re invested in in the comments section, whether mentioned on this site or not.

Disclosure: Long TeamHealth, Synutra, eFuture.

This article expresses an opinion and the author does not receive compensation for it and has no business relationship with any company whose stock is mentioned in this article; do your own due diligence before making investment decisions.

8 thoughts on “Portfolio Update Dec. 17”

    1. Thanks guys; TSL’s economics look attractive, my only concern with it is that it’s a large Chinese transaction and that it may run into regulatory issues re: foreign exchange capital controls in China. That’s the only reason why I’m not in it, although it may very well pass the test despite its size.

    2. By the way, this is a great article, and same goes for the Part 2. Thanks for sharing. It goes without saying that all readers from this blog are encouraged to share it around, on relevant blogs, and on social networks as appropriate. Everything helps to raise the awareness 🙂 This is only a hobby but it’s nice to see your content read by a growing audience.

        1. Nice well done! I’m enjoying the gains on SYUT but also still hurting on CAB. But until we know more.. we can only wait

  1. Has anyone been following the TWX/T merger? Current spread is 13.4% plus shares in T. Trump’s not a fan but they don’t need FCC approval.

    1. I haven’t really looked at it but planning to do so at some point in the year. I know that some analysts have downplayed the regulatory risk, which may be correct, but I have to admit that I’m a bit concerned about the Trump effect for sure! What if he tweets about it.. xD

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