MANDA Positions Update

Today’s market implosion in the financials have spilled over into our mergers and acquisitions portfolio, the MANDA Fund. All of the funds five holdings are down today, and although the damage is hardly on par with AIG and Lehman, I do feel it’s my fiduciary duty to examine the portfolio and give guidelines not only for current holdings but for future acquisitions as well.

Bluegreen Corporation (BXG) fared the worst today but not because of any financial fallout. A company press release said that Diamond Resorts, the acquiring company, needs more time to conduct its due diligence, extending its exclusive agreement to November 15th. No other details were given leaving already nervous investors to speculate as to why the deal is being held up. The stock closed down 13% at $9.54, just above its intra-day low. It’s tough to say what would have happened under more normal circumstances, but I’m thinking investor reaction might not have been nearly so severe. But that doesn’t mean that I’m going to watch the price slide much further. I’ll give it a some wiggle room based on continued uncertainty but if it falls below $9, I’m getting out. I don’t want to be there if the price sinks to its $6 preannouncement level.

Photon Dynamics (PHTN) was down over 5% on no new news. As has been noted in recent blogs, the stock tumbled several days ago on what appeared to be investor jitters over the soundness of the deal’s financing. Today’s decline pretty much mirrored the movement of the S&P so I’m thinking that the price action is just a reflection of investors’ fears. I’m hanging onto this one until something happens, one way or another.

The other three holdings—Rohm & Haas (ROH), Community Bankshares (SCB), and Lincoln Bancorp (LNCB)–are all down slightly riding on the market’s coattails. I won’t be parting with any of these unless there’s a good reason to do so. Community Bankshares just announced that it’ll be paying a twelve cent dividend on September 30th, by the way.

Although we’re going through a very rocky period, I still intend to add to positions to the MANDA portfolio but I’m going to be a bit more rigorous in my selection criteria. No way an I touching the Merrill/B of A deal, at least not until some of the dust clears. Besides, I don’t particularly like stock-swap only deals. As always, cash is king. Especially in this market.

Update on Friday’s speculative Lehman play
Good thing I didn’t have time to buy any Lehman calls. That would have really hurt. (Had I only bought Merrill calls!)

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