The Special Situations Real Money Portfolio continued its strong performance in March with another great month in April. The portfolio closed on April 30, 2010 with a balance of $34,683.37. That’s up 3.2% for the month.
So far this year, the Special Situations Real Money Portfolio is up 12.11% year-to-date. That is 5% better than the S&P 500 year-to-date return of 7.05%. Overall, the portfolio is up 189.03% since inception on October 19, 2004. The internal rate of return or average annualized rate of return is still an impressive 31.51%.
Let me bring you up to speed on the transactions that took place in the Special Situations Real Money Port this past month. First, I finally received on April 5, 2010 the debentures for the shares of Western Sizzlin held in the portfolio. In total, I received 3,228 Steak N Shake debentures. However, that was rounded down to an even 3,000 debentures, and I received $8.07 per share for the 228 “baby debentures” held in the portfolio. On April 20, the debentures were renamed to Biglari Holdings Inc. Redeemable Sub. Deb. to reflect the name change of Steak N Shake (SNS) to Biglari Holdings (BH).
On April 12, 2010, I was cashed out of my 3COM (COMS) holdings. I held 400 shares of 3COM that I purchased on November 19, 2009 for $7.45 per share. Those 400 shares were cashed out for $7.90 per share. I made a net return of 5.79% on that investment. Considering that investment took 145, my average annualized rate of return on this investment is about 14.6%. That’s a pretty nice return for an unleveraged risk arbitrage trade. That same day I picked up shares of 500 shares of another company undergoing a merger with similar profit potential as 3COM.
On April 16, 2010, I invested $3,686.95 in a different type of special situation. This one involves an activist investor that has a track record for making changes to boards and then improving business profitability. This investment relies on shareholders voting in support of the proxy distributed by the activist investor.
On April 22, 2010, I sold out of my shares of net-net Conn’s (CONN) after shares ran up substantially. I sold the last 500 shares of Conn’s (CONN) is the Special Situations Real Money Portfolio. My stop order was triggered and 400 shares were sold for $9.75 and 100 shares sold for $9.82 per share. The total proceeds from that sale came to $4,875.05. I bought this block of 500 shares on February 9, 2010 at $4.50 per share for a total cost of $2,256.95, Therefore, my total profit for this trade was $2,618.10. The return on these 500 shares came out to be an amazing 116%!
Finally, on April 26, 2010, my shares of Boss Holdings (BSHI) were removed from my account and I should be receiving $7.65 per share shortly. I originally bought the 99 shares of Boss Holdings in my account for $6.00 per share on January 22, 2010. Later in the day on April 26, 2010, I also put in an order to buy another merger arbitrage opportunity with a small regional bank.
If you’d like to learn more about the positions I’ve been trading in this portfolio, follow my research on new special situations, and participate in our exclusive community of stock workout aficionados, consider joining my premium service, Fat Pitch Financials Contributors Corner.
Disclosure: At the time this article was posted, I owned shares of Biglari Holdings (BH) and Boss Holdings (BSHI). I no longer own shares of 3COM, and Conn’s (CONN).