Special Situations Real Money Port Update

Monday, March 5th, 2007 | Model Portfolios, Special Situations, Special Situations Real Money Portfolio with 1 Comment

It’s time to update you on the current performance of the Special Situations Real Money Port. The Special Situations Real Money Port is actually my son’s Coverdell Education Savings Account. This portfolio focuses on special situation opportunities including: going private transactions, odd lot tender offers, spin-offs, mergers, rights offerings, and other unique opportunities that may arise to provide individual investors opportunities to exploit market inefficiencies.  These opportunities are detailed in Fat Pitch Financials Contributor’s Corner.

We last discussed the performance of my special situation portfolio at the beginning of the year when I told you how I did in 2006. Now that we are two months into 2007, it’s time to give you another update.  Only two transactions have occurred since the beginning of the year.  On January 30th, I received 600 shares of Western Sizzlin (WSZL) as a result of excersizing 1,200 rights to purchase Western Sizzlin that I bought back on November 27, 2006 for $0.52 per right.  The Western Sizzlin rights allowed me the purchase one share of Western Sizzlin for every two rights and $7.00 per share.  I exercised my rights on December 8, 2006 to acquire 600 shares of Western Sizzlin.  There was the option to request additional shares for $7.00 in case not all the rights were excersized, but I was out of cash and the terms indicated that you had to have been the original recipient of the rights.  However, another member of Contributor’s Corner indicated that they were able to receive additional shares of WSZL via over-subscription even though they bought rights on the open market.  I’m up about $634 dollars as of February 28th.  I have an order in to sell these shares when they reach my limit price.

In addition to the Western Sizzlin activity, I also contributed another $2,000 to this account on February 9, 2007.  Each year I contribute the limit to my son’s Coverdell Education Savings Account.  I have yet to invest this $2,000 but I’m sure I’ll find the right opportunity within the next few weeks.

In summary, I’m currently holding the following in this account as of February 28, 2007:

  • Cash: $2,106.09
  • 300 shares of Sally Beauty Holdings (SBH): $2,715.00
  • 600 shares of Western Sizzlin (WSZL): $5,490.00

My performance for the first two months of 2007 has been 76.1%.  This is primarily due to the returns on Western Sizzlin. Since inception on October 19, 2004, the rate of return for the Special Situations Real Money Portfolio has been 19.1% IRR.  I have really recovered from some of the setback this portfolio faced in 2006.  When I last reported the performance for the Special Situations Real Money Port, my rate of return since inception was 14.5%. I’ve improved my overall performance fairly dramatically this year so far. However, my goal is to try to increase my rate of return to at least 20% since inception by the end of 2007.  Given my current performance, I believe that maintaining a 20% rate of return is a very attainable goal.

If you would like to keep up with every move of the Special Situations Real Money Portfolio, consider signing up for Fat Pitch Financials Contributor’s Corner. In addition to timely updates on transactions in the Special Situations Real Money Port, you will also gain access to a list of current going private transactions, odd-lot tender offers, and other special situation opportunities that you probably won’t read about anywhere else. There is also a very active forum where other members (many of whom are performing even better than I am) discuss their current special situation and risk arbitrage investments. I encourage the sharing of ideas by rewarding members who provide information 3 free days for each contribution they make. I get a lot of great ideas from fellow member this way, and I’m sure you will too if you join.


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