Archive for the ‘MANDA Portfolio’ Category

MANDA & Channeling Stocks Updates

Tuesday, June 2nd, 2009

If anyone’s been wondering why I haven’t updated these portfolios it’s because there hasn’t been any activity in either one until recently.

Channeling Stocks Update
Yesterday, the lower channel of long holding OSI Pharmaceuticals (OSIP) in the Channeling Stocks Portfolio was broken and the position was closed out at a loss at the end-of-day price of $30.31. There’s only one stock left–Huaneng Power (HNP), a long position. (This paper-traded portfolio was for illustration purposes only and is being closed out.)

MANDA Update
However, M&A activity seems to be picking up after many dormant moons. This is good news for the MANDA Portfolio which has been reduced to only five holdings—or four, actually, since TriNet completed its acquisition of human resources firm Gevity (GVHR) yesterday at the deal price of $4.00 per share. Including a five cent dividend, the trade returned over 7%.

Today brought a flurry of M&A activity. The first M&A event occurred in the data storage universe involving a bidding war between NetApp (NTAP, formerly Network Appliances) and EMC Corporation (EMC) for Data Domain (DDUP). On May 20th, NetApp offered $25 per share for the company, but was one-upped today by EMC who offered $30 a share. Will NetApp make a counteroffer? And if so, by how much? Apparently, investors seemed to think they will since Data Domain’s stock closed at $31.58. I, however, did not buy into that logic since NetApp is going to have to come up with more than the $1.8 billion currently sitting on the table. That’s considerable coin. And no matter how much NetApp offers, EMC can probably outbid it since its pockets are much deeper.

In the second event, oil and gas services company Cameron International (CAM) agreed to acquire Natco Group (NTG) in an all-stock transaction valued around $780 million. Terms of the deal call for Natco shareholders to receive 1.185 shares of Cameron common stock per one Natco share. I generally shun stock swap deals because one never knows how they’ll work out, although if the swap appears attractively priced close to the merger completion date I might go for it. (The deal is expected to close sometime in the third quarter.)

The last event was also in the energy arena. Midstream energy partnership Hiland Partners agreed to be acquired by affiliates of major stockholder Harold Hamm. Like most master limited partnerships, Hiland is divided into two separate entities: Hiland Partners (HLND) is the limited partnership, and Hiland Holdings (HPGP) is the general partnership. Terms of the acquisition call for unitholders of Hiland Holdings to receive $2.40 per unit, or 3% above today’s closing price. Holders of Hiland Partners will receive $7.75 per unit, or 4.7% above the closing price. It wasn’t mentioned when the deal is expected to close but there’s an excellent chance that the July dividends will be distributed thus increasing the expected return. I picked up some of the limited partnership (HLND) for the MANDA Portfolio at the closing price of $7.40.

Both the MANDA and the Channeling Stocks holdings will be updated on the website over the weekend.

Disclosure: MANDA is a real portfolio and I do hold positions in the stocks mentioned, unlike the Channeling Stocks Portfolio which was designed for instructional use only.

Updated MANDA Holdings

Monday, April 27th, 2009

Click on table to enlarge.

MANDA Weekend Update

Monday, April 6th, 2009

A little late getting this out, but here it is.

Exar Corporation (Nasdaq: EXAR) successfully completed its acquistion of hi/fn, Inc. (Nasdaq: HIFN) at $4 per share as of midnight April 2nd. This transaction is reflected in the latest MANDA portfolio holdings shown below.

Note that in the MANDA portfolio as well as in the Channeling Stocks portfolio, the realized return is based on a total portfolio value equal to exactly that of the current holdings (where each holding is of equal dollar value). If a static portfolio value is assumed (say a $100,000), the realized return will be a different number (either more or less). There’s no one correct way to calculate the theoretical total return. I prefer the former method for a couple of reasons: it’s easier to calculate and easier to demonstrate, i.e., the reader can see exactly how each trade performed.

Click on table to enlarge.

Channeling Stocks & MANDA Updates

Wednesday, April 1st, 2009

I was off-site yesterday meeting with my web developer and did not get a chance to post the updates to the new Channeling Stocks Portfolio and to the MANDA Portfolio which is an M&A fund.

Channeling Stocks additions and subtractions
It’s either a bad twist of fate of a cruel April Fool’s joke, but the market has been going against the grain of this portfolio where the holdings are all on the short side. (Although I’m long the SKF, it is a bear ETF.) Stop losses were triggered today on Goldman Sachs (GS) and Roper Industries (ROP), but I only got rid of Goldman. I’m keeping Roper because I believe the stop loss was set too low. I’m raising it to $44 near the top of its channel. This will allow the stock a bit more “wiggle” room. Today’s gain came on very low volume which leads me to believe that there’s not a lot of investor confidence in the up direction. We’ll see. As I said, this is going to be a learning experience for both of us and I’m doing this so you can see the thought processes that go into my choices. This isn’t as easy as it looks!

Long entry points were established on two stock candidates: Huaneng Power (HNP) and Sohu (SOHU), both Chinese companies. Huaneng was picked up yesterday at its closing price of $26.85. The target price is $30 and $25 is the stop loss.

Sohu was acquired today at its closing price of $43.63. Its price target is $50 with a $40 stop loss.

MANDA update
No new additions have been made to the M&A portfolio but one merger was completed this week. Private equity investment group JLL Partners completed there acquisition of Pharmanet Development (PDGI) on Monday. Shareholders of PDGI received $5 in cash per share. In the MANDA portfolio, this represents an 8.7% gain on the transaction.

The updated portfolios will be posted on Friday (or over the weekend).

Now back to researching today’s blog which I’m hoping will be out early this evening.

MANDA Update + New Portfolios

Tuesday, March 24th, 2009

I’m busy working on two new portfolios that will be introduced shortly which is why today’s blog is rather thread-bare. But I do want to alert all of you who are following my M&A portfolio (MANDA) that portfolio constituent, Aladdin Knowledge Systems (ALDN) today completed its merger with private equity group Vector Capital. Aladdin shareholders will receive $11.50 in cash per share. This represents a 5.3% return on the trade. Overall, the MANDA portfolio is up 2.6% since 6/26/08 inception. Compare that with -37% on the S&P 500. Woo-hoo!

Here’s the list of all open and closed MANDA trades since portfolio inception.

[Click on table to enlarge.]

MANDA Updated Table

Friday, March 13th, 2009

The table below reflects today’s addition of Enpointe Technologies, ENPT. This addition is discussed in an earlier article posted today.

(Click on table to enlarge.)

Another MANDA addition: Enpointe (ENPT)

Friday, March 13th, 2009

Yesterday, Enpointe Technologies (ENPT), a global business-to-business IT provider, agreed to be acquired by its founder and CEO Attiazaz (“Bob”) Din and his family for $2.50 in cash per share. The Din family are major shareholders owning about 26% of the outstanding shares of common stock.

The board approved the merger and is recommending shareholder approval. There is a 30 day “go shop” clause in the agreement whereby a special committee representing the company can solicit higher bids. Closure of the deal is dependent upon the usual customary requirements such as regulatory and shareholder approval as well as debt financing by Mr. Din who has already supplied a letter of commitment.

The company has made no statement as to when the transaction might close but I’m guessing near the end of the second quarter or the beginning of the third. I added the stock today to the MANDA portfolio at a price of $2.20 which represents a 13.6% return upon deal completion.

The MANDA portfolio table will be updated shortly to reflect the addition.

MANDA Updated Table

Monday, March 9th, 2009

Based on today’s addition of Gevity (GVHR) as discussed in the article below, here’s the updated MANDA holdings.

[Click image for larger view.]

M&A & Channeling Stock Updates

Monday, March 9th, 2009

New MANDA addition
I don’t know how I missed this one but last Thursday human resource services company Gevity (GVHR) agreed to be taken private by the TriNet Group in an all-cash deal worth $4 a share nearly doubling the previous day’s closing price. (The stock hasn’t been above $4 since last November after falling well off it’s $30 high set back in 2006.)

The deal has the approval of both boards as well as two of its major shareholders, ValueAct Capital Management LP and General Atlantic LLC which own over 13% and 9% of outstanding shares respectively. General Atlantic also happens to be TriNet’s biggest shareholder. Pending Gevity shareholder approval, the deal is expected to close in the second quarter. An analyst at Roth Capital Partners said that he expects shareholders to approval the deal.

In a statement released by the company, Gevity will be paying a special 5 cent dividend on April 30th to shareholders on record as of April 16th. In light of the merger, the board postponed their annual shareholder meeting from May 20th to a time as yet to be determined.

I have a good feeling that this merger will succeed and I added the stock today at $3.78 to my M&A portfolio, MANDA. Including the proposed $0.05 dividend, this trade will yield 7.1%.

Good news on the Dow/Rohm-Haas front
The threat of a lawsuit brought by Rohm-Haas (ROH) against Dow Chemical for failure to complete their merger within the allotted time finally forced Dow into a pow-wow with the chieftains at Rohm. This was a tough one for kimosabe Dow since the financing they expected from the Kuwaiti government unexpectedly fell through and paying the proposed $78/share for Rohm stock would have put Dow’s credit rating and viability as a company in serious jeopardy.

The trial was all set to commence this morning but proceedings were halted twice by the judge. Both companies finally agreed to proceed with the merger as planned especially since Warren Buffett and the Kuwaiti government both rode in on white horses throwing $3 billion and $1 billion respectively into the kitty. The two largest shareholders in Rohm-Haas also agreed to pony up $2.5 billion in Dow preferred shares plus an additional $500 million in cash. Rohm shareholders will receive their $78 per share plus proceeds from the almost $3 million per day penalty fee that Dow has racked up for not closing the deal on time.

The acquisition is set to close no later than April 1st. Let’s hope this won’t be an April Fool’s joke on us Rohm stock holders. (ROH is a MANDA holding.)

Other Big Pharma deals
On January 23rd, Wyeth (WYE) agreed to be acquired by Pfizer (PFE) for $68 billion in a cash and stock swap deal ($33 in cash plus 0.985 shares of Pfizer). One third of the deal is being financed by banks who said they will withhold financing if Pfizer’s credit rating drops below a certain level. Since the deal was announced, shares of Pfizer have dropped 25%. I don’t like buying into deals involving stock swaps, especially in this negative market climate.

Two big deals today—one done and one in the works. Merck (MRK) picked up Schering-Plough (SGP) in a $41 billion cash and stock swap deal ($10.50 in cash plus 0.5767 shares of Merck). I’m not taking this one for the same reason given above.

The Wall Street Journal has just reported that the board of Genentech (DNA) is seriously considering Swiss-based drug giant Roche’s $95/share bid representing a $46.7 billion deal. This deal isn’t struck as of this writing and I’ll be scrutinizing the terms if and when it’s offered. Roche already owns 56% of DNA stock and has been trying to buy it for months.

Note: My blog on 11/4/08 cites other potential takeover candidates in the drug sector. Here are the eight stocks that I felt were attractive targets: BIIB, CRL, DNA, GENZ, GILD, LIFE, and TECH.

Channeling stocks update
For those of you following my Channeling Stock Breakout recipe, two stocks broke their lower support channels today: SWS Group (SWS) and Roper Industries (ROP). Bearish positions can be taken on these two and they’re both optionable (watch out for light liquidity). Recent channeling breakdowns, Oracle (ORCL) and Paccar (PCAR) are both continuing strongly to the downside.

Tomorrow I’ll be looking at a defensive play and by ”defensive” I mean it in more ways than one. You’ll see.

MANDA Updated Table

Tuesday, February 24th, 2009

This table incorporates today’s additions of NCX and HIFN.

Click on table to enlarge.