The Special Situations Real Money Portfolio is a Coverdell Educational Savings Account that invests in stock workouts and other special situations. I created this account on October 19, 2004 as an experiment in arbitrage investing, and I’ve been writing about the portfolio here at Fat Pitch Financials ever since.
At the end of the first quarter of 2008, the Special Situations Real Money Port closed with a balance of $14,362.01. The portfolio is down 9.96% since the beginning of the year. It’s also down $964.03 from the February’s closing balance of $15,326.04. Nevertheless, the total return for this portfolio is still 43.62%. The overall portfolio performance maintains a respectable 18.45% internal rate of return since inception.
March was a rough month for my current holdings. Western Sizzlin (WEST) hasn’t been able to complete its ITEX Corp. (ITEX) exchange offer and it is also still struggling to affect change at Steak & Shake (SNS). The CFO of Sally Beauty Holdings (SBH) resigned early in March and the stock has been in a slump ever since. Finally, it appears I bought way too early into Loews Corp (LTR) in anticipation of the company’s split-off of Lorillard, their tobacco business. When I first bought Loews back in early January, the company appeared be selling below net asset value, but I didn’t really take into consideration the company’s investments in mortgage backed bonds. Hopefully, April will bring some better news for these positions.
In March, I picked up 99 shares of Steven Madden Ltd. (SHOO) for $16.85 per share on March 10th. The company announced a tender offer and I thought I might be able to profit from this situation. The tender offer included a provision that excluded odd lot holders from being prorated if the tender offer was oversubscribed. The tender offer went smoothly, but the tender price came in towards the lower end of the offer range. I only got $17.00 per share and after expenses I actually lost a few dollars.
I also invested in the recent Sybase (SY) tender offer. That tender offer just expired and I should be getting the results soon. Given my cost basis, I think I’ll make some decent profit on this one.
You can keep up with the latest moves of the Special Situations Real Money Portfolio by subscribing to Fat Pitch Financials Contributor’s Corner. This month I’ve added an exciting new going private transaction to the portfolio and it is already up substantially as a result of a definitive proxy filing. Regardless of the economic climate, there always appears to be a steady stream of special situation opportunities uniquely suited for individual investors. Join me in Contributor’s Corner to take advantage of these opportunities.
Disclosure: I current hold positions in Western Sizzlin, Loews, Sally Beauty Holdings, and Sybase. I don’t currently own ITEX, Steak n Shake, or Steven Madden.