Special Situations Real Money Portfolio November 2009 Update

Tuesday, December 8th, 2009 | Special Situations Real Money Portfolio with 5 Comments

Here’s a quick update on my Special Situations Real Money Portfolio. The portfolio closed the end of November with a balance of $26,972.91. That’s up 2.81% from the balance I reported at the end of October for the Special Situations Real Money Portfolio.

The Special Situations Real Money Portfolio is a real Coverdell Education Savings Account I created for my son on October 19, 2004. I decided to dedicate this small tax sheltered account to special situation opportunities and Graham style stock workouts. Back in 2004, the primary focus was on going private transactions. Since then, I have also added tender offers, spinoffs, split-offs, net-nets, merger arbitrage, and some other unique event based opportunities.

The year-to-date performance for the portfolio remains a strong 45.35% return. Looking back at the portfolio’s performance since inception on October 19, 2004, the Special Situations Real Money Portfolio has produced a total return of 169.72% as of the close of business on November 30, 2009. The average annualized return since inception remains an amazing 29.24%.

The Special Situations Real Money Portfolio was involved in several transactions this past month.  On November 9th, I received 93 shares of Steak ‘n Shake (SNS) from the 200 shares of Western Sizzlin (WEST) the account held then.  I also received $0.13 in cash in lieu of fractional shares as a result of that stock dividend/spinoff.

Also on November 9th, I was cashed out of the 1,000 shares of Centennial Communications Corp. (CYCL). I received $8.50 per share in cash from AT&T (T) as expected in that merger deal.  I originally purchased those shares of Centennial Communications on October 2, 2009 for $7.90 per share. My net return on that 39 day transaction was 7.5%. The average annualized rate of return for that simple deal came to a whopping 70.2%.

Then on November 10th, I picked up another 200 shares of Western Sizzlin (WEST) at $8.68 per share. Western Sizzlin shares now represent the right to receive a callable 5 year debenture with a $8.07 face value that pays 14% interest. Even if the debenture is called after the first year, I should get a nice return on this investment.

I’ve been also looking for another split-off to invest in and I found one on November 16th. Bristol-Myers Squibb (BMY) initiated a split-off of their infant formula subsidiary, Mead Johnson Nutrition (MJN). Bristol-Myer  shareholders will roughly receive $1.11 in Mead shares for each $1 in Bristol shares they tender. I love the odds associated with these type of deals. I picked up 99 shares to avoid any proration when I tender my shares.

Finally, on November 19, 2009 I bought another merger arbitrage position in a tech company. If you are interested to learn more about this recent transaction, consider becoming a member of Fat Pitch Financials Contributors Corner. Sign up for my premium Fat Pitch Financials Contributors Corner to track my research and follow my next moves in the Special Situations Real Money Portfolio.

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Comments

  • First off great website! Just looking at the WEST transaction, the yields I get are quite different depending on when the sub debt gets called. Assuming the deal closes today and using purchase numbers, you would pay $8.69 for an $8.07 14% 5 yr sub debt, effectively $107.5 for a $100 bond. The yield to call in 1 yr is then 6.5%, 2yr is 9.4%, 3/4/5 is just under 10%. So call risk in year 1 changes the returns quite significantly

    Roger December 11th, 2009 at 12:38 am
  • With regards to the BMY/MJN split off, I posted some information about in on my blog.

    They extended the dates as only about 1 million shares have been put up for the exchange.

    Ken December 12th, 2009 at 5:33 pm

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