Thankfully, the Special Situations Real Money Portfolio has produced a total return of 221.95% since inception back in 2004. The annualized rate of return to date is still a healthy 23.63%.

Special situation opportunities have been exceedingly hard to find. Many of the available deals have been of lower quality and higher risk variety. I am hoping things will turn around soon.

Balance: $38,633.48
IRR: 23.63%
Return: 221.95%
YTD: -5.69%

More importantly, the Special Situations Real Money Portfolio returned 25.94% in 2010. I was very please with that performance. However, my 2010 performance was significantly lower than the 50 percent return in 2009.

Since the inception of this portfolio back in October of 2004, I’ve generated a 224.7% total return on my investment.  The compound annual growth rate since inception was 29.73% as of December 31, 2010.  I’m still very close to the 30.75% annualized rate of return that I reported on at the end of 2009.  It’s amazing to think what size this account could grow to in ten years at this pace.  That’s when I’ll start to draw down this Coverdell Education Savings Account to pay for my son’s college education.

This portfolio ended with $9,961.49 in cash on December 31, 2010.  I picked up three new positions in December and I was cashed out of one holding.  That holding was 99 shares of Validus Holdings LTD (VR).  I bought those 99 shares of Validus back on November 12, 2010 for $29.49.  Those shares were tendered for $30 a share on December 15, 2010 and I had to pay a $25 fee associated with voluntarily tendering those shares. After commissions and fees I only eked out a 0.63% return.

I also collected a dividend associated with Fremont Michigan Insuracorp (FMMH) and and interest payment for my Biglari Holdings (BH) redeemable subordinated debenture.

If you would like to learn more about my past trades in this portfolio and review its current holdings, consider subscribing to Fat Pitch Financials Contributors Corner.

Disclosure: At the time this article was posted, I did not hold shares of Validus Holdings LTD (VR). However, I own shares of Fremont Michigan Insuracorp (FMMH) and Biglari Holdings redeemable subordinated debentures.

As you probably recall, the Special Situations Real Money Portfolio is actually my son’s Coverdell Education Savings Account that I set up on October 19, 2004 as an experiment. I wanted to see if an individual investor could earn stable returns from special situations and arbitrage opportunities similar to the opportunities Benjamin Graham called “stock workouts.” The experiment has been a huge success and was the motivation for me to create my premium service, Fat Pitch Financials Contributors Corner. It also inspired me to launch a Workouts model at Covestor this past month.

Year-to-date the Special Situations Port is up 20.74% as of the market close on November 30, 2010.  That is still dramatically better than the S&P 500 return over the same period. Over the long run, I expect the Special Situations Real Money Portfolio to continue to outperform.

Since the inception of this portfolio, my total return is now 211.29% as of the end of the third quarter of 2010. The compound annual growth rate for the Special Situations Real Money Portfolio is a rock solid 29.20%, and it has been around this number for many months now.

In November, I sold 2,000 shares of Presidential Realty Corp. B (PDL.B) for $2.20 per share. I originally bought these shares on September 1, 2010 for $1.80 because the company plans to liquidate its assets, which the company valued at approximately $2.25 per share. I netted $706.03 on that trade, which comes to a 21.74% return.

On November 12, 2010, I was also cashed out of the 700 shares of Alloy Inc. (ALOY) that I held in this portfolio when ZelnickMedia completed its merger with Alloy. I originally picked up those shares for $9.48 per share on August 11, 2010.  That netted me $217.05, which comes out to a 3.27% return.

On November 15th, I sold half my position in China Techfaith Wireless (CNTF) at $4.15 per share.  I originally bought shares on this company on July 23, 2010 at $3.00 per share.  I bought those shares based on the fact that China Techfaith was trading at less than two thirds of its net asset value at the time. That trade generated just over a 38% return.

Finally on November 29, 2010, I was cashed out of the 500 shares of Bowne & Co Inc (BNE) held in the Special Situations Real Money Portfolio when this merger opportunity was cashed out at $11.50 per share. I also received a dividend on November 16th. I bought those 500 shares on September 30, 2010 for  $11.32. My net return on this position was 2.2%.

I also bought a new position in a tender offer opportunity and I added to merger arbitrage position. However, I still had $14,020.02 in cash to use in case any other new opportunities became available. To learn about those new stocks and all my past trades consider subscribing to the Fat Pitch Financials Contributors Corner premium service.

Year-to-date the Special Situations Port is up 25.62% as of the market close on October 29, 2010.  That is still dramatically better than the S&P 500 return over the same period. Over the long run, I expect the Special Situations Real Money Portfolio to continue to outperform.

Since the inception of this portfolio, my total return is now 223.87% as of the end of the third quarter of 2010. The compound annual growth rate for the Special Situations Real Money Portfolio is a rock solid 30.88%, and it has been around this number for many months now.

The Special Situations Real Money Port only had $192.82 in cash at the end of October 2010. The only position I closed out in October was Sunstone Hotel Investors Inc. (SHO).  I sold 108.41637 shares at $10.51 on October 26, 2010. I had originally bought 99 shares of Sunstone Hotel Investors on June 2, 2010 at $19.45 per share.  Sunstone was conducting a tender offer at the time. During the tender offer the company amended the tender offer price range lower. The revised price range was below my purchase price, so I decided not to tender. That ended up being a mistake. This trade resulted in a 41.4% loss. I held on to the stock way too long hoping at first that the high dividend would offset the loss, but the dividend was converted to a stock dividend shortly after the tender offer. Then with the real estate continuing to decline this year, there was little chance that this stock would recover. I should have sold when the special situation opportunity ended.

While I was happy to see that my Special Situations Port was up 2.9% in September, that performance lagged the S&P 500 last month.  The S&P 500 was up a whooping 8.9% last month. According to Standards & Poor’s, large-cap issues posting their best September gain (+8.76%) since September 1939 (+16.46%), with 47% of the stocks posting double-digit gains.

Year-to-date the Special Situations Port is up 24.50% as of the market close on September 30, 2010.  That still dramatically better than the S&P 500 return of 3.9% over the same period. I expect that while the major indices may surge on news of an economic recovery, the Special Situations Real Money Portfolio will under perform. However, over the long run, I expect the Special Situations Real Money Portfolio to continue to outperform. This is basically the tortoise versus the hare situation. Slow and steady arbitrage opportunities will likely still beat out growth investing over the long haul.

Since the inception of this portfolio, my total return is now 220.98% as of the end of the third quarter of 2010. The compound annual growth rate for the Special Situations Real Money Portfolio is a rock solid 31.27%, and it has been around this number for many months now. I think there are very few other bloggers that are reporting such high returns for a real portfolio as far back as 2004 as I have.

September was a pretty busy month for the Special Situations Real Money Portfolio. The month started off on a positive note as I received $38.00 per share for the 99 shares Caseys General Stores Inc (CASY) $38.00 that I tendered back in August.  I bought those 99 shares on August 11, 2010 for $37.81.  I ended up with a net loss of $13.14 on that tender offer. I was hoping that this Dutch auction tender offer would have come in closer the the $40 upper end of the offer range. However, the tender offer was oversubscribed and came it at the minimum offer price of $38.00. In retrospect, I probably should have required a larger margin of safety on that deal, but there was slim pickings among the available opportunities at the time.

Then on September 3rd, I sold 1,000 shares of Southwest Water Co. (SWWC) for $10.99 per share. I originally picked up the 500 shares of Southwest Water on April 12, 2010 at $10.46 per share and then I followed up with another purchase of 500 shares at $10.38 on May 19. 2010. My net return on this merger arbitrage trade came to 5.26%. If I annualized those transactions, the internal rate of return comes to 16.07%. That’s a pretty good return for a fairly low risk merger arbitrage opportunity.

On September 15th, I was cashed out of an odd lot tender offer position in WebMD Health Corp (WBMD) for $52.00 per share. I bought those shares for $50.93 on August 26, 2010. That tender offer netted the portfolio a 1.5% return.

I reinvested those returns on 900 Occam Networks (OCNW) on September 16, 2010. I bought those shares for $7.16 per share. I was a bit hasty in placing my order, so I didn’t realize that the offer Occam Networks was not an all cash offer.  I quickly decided to sell these shares since I discovered this error in my reasoning.  Luckily, I was able to sell those 900 shares of Occam for $7.29 on September 24, 2010 and was able to net a 1.6% return.

Finally, I bought 500 shares of Bowne & Co. (BNE) at $11.05 per share on September 22, 2010, and then I bought another 500 shares at $10.88 on September 23rd.  The price of BNE shares rose dramatically on September 30th, so I decided to sell half my position at $11.32 per share.  I plan on retaining the remaining 500 shares until Bowne & Co. shares are bought out at $11.50 or the price of the shares gets real close to that price.

The Special Situations Real Money Port has $15,178.42 in cash at the moment. The current market conditions are making it difficult to find reasonable returns in tender offers and merger arbitrage opportunities. Given that the portfolio is only up 24.5% year-to-date and the difficult market conditions for special situations, I don’t expect to be able to match the 50.5% return of 2009.

Disclosure: At the time this article was posted, I owned a long position in Bowne & Co. (BNE). I no longer own shares of Caseys General Stores Inc (CASY), WebMD Health Corp (WBMD), Southwest Water Co. (SWWC), and Occam Networks (OCNW).

When I last reported on the Special Situations Real Money Portfolio in April, the portfolio had a balance of $34,683.37. By then end of May 2010, the portfolio’s value increased to $35,026.44.  After the market closed on August 31, 2010, the portfolio has grown to $37,421.88.  That’s a gain of 7.9% since the end of April.

So far this year, the Special Situations Real Money Portfolio has gained 20.96%.  That is particularly impressive given that the S&P 500 index returned -4.6% over the same period.

Since inception on October 19, 2004, the Special Situations Real Money Portfolio has produced a total return of 211.85% (as of August 31, 2010).  The average annualized rate of return for this portfolio continues to be an impressive 31.09%.  This is just slightly lower than what I reported at the end of April.

Of the current $37,421.88 in the portfolio, I only held $3,805.31 in cash at the end of August. Yesterday, I invested almost all of that remaining cash in a new liquidation opportunity that I recently shared with subscribers of Fat Pitch Financials Contributor’s Corner. Find out my latest move by subscribing to a one year membership of Fat Pitch Financials Contributors Corner. Use the coupon code FPF10 to get $10 off an annual subscription purchased by September 3, 2010.

Over the next few days I will be detailing the results of all my recent trades that have resulted in my current 21% gain so far this year.  Stay tuned by following the Fat Pitch Financials RSS feed or signing up for free email notification.

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).

What caused March to be such a good month? Some of the positions that I picked up earlier in the year finally starting coming to maturity. I sold three different positions this past month.

First, let me discuss a stock that was trading below Benjamin Graham’s deep value screen that selects stocks trading below two-thirds of net current asset value (NCAV). On February 8, 2010, I bought 500 shares of Conn’s (CONN) at $5.33 per share for the Special Situations Real Money Portfolio. I estimated Conn’s NCAV to be about $8.39 per share. On March 11, 2010, I sold those 500 shares of Conn’s for $6.85 per share.  My main reason for selling those 500 shares was because Conn’s was selling above 66% of NCAV on no new significant news. My total profit on this trade was $746.05. That’s a 27.9% return in just over a month! I also had bought an additional 500 shares of Conn’s for $4.50 per share on February 9th when the stock price plunged. I’m hoping to sell those remaining shares at or close to NCAV. Given that CONN is trading around $8.03 this morning, that might not be too far away.

I sold the 99 shares of MDS Inc. (MDZ) held by the Special Situations Real Money Portfolio on March 16, 2010. I sold the shares at $8.45 a share. My total proceeds from that sale came to $829.58. Since I bought those shares on February 22, 2010 for a total of $828.65 my return on this trade was $0.93. I basically broke even. Why did I sell? Basically, I didn’t realize the tax withholdings associated with this Canadian tender offer. Given that this is a tax advantaged Coverdell Education Savings Account, I don’t believe I’d be able to recover the tax withholding on my income taxes next year. Also, I’d have to pay a $25 fee to tender the shares. Therefore, I placed a limit order shortly after I figured this out. That limit order was triggered when MDS shares traded above $8.45. Given that MDS is now at $8.86, maybe I should have waited until the impacts of the reduced share count were felt before selling.

On March 24, 2010, I sold the 4,999 shares of Kid Castle Educational Corp. (KDCE) in the Special Situations Real Money Portfolio. I sold the shares for $0.17 per share, just a penny below the tender price of $0.18 that the company was offering. I’d rather have the certainty of cash in hand rather than wait weeks for the last penny, so I sold at $0.17. The total proceeds from this stock sale came to $842.86. I bought these shares on October 21, 2009 for a total of $606.83. My total return for this trade came to 38.90%. The average annualized return given the trade took 155 days is about 91.6%.

So far this year, the Special Situations Real Money Portfolio is up 8.6% year-to-date. Overall, the portfolio is up 180.00% since inception on October 19, 2004. The internal rate of return or average annualized rate of return is still an impressive 31.27%. 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.

The main issue this month was that none of the deals I’m invested in came to completion. It was a rather boring month in general.  There have been very few new opportunities and there hasn’t been much activity on existing deals. This pattern makes me wonder if the economy is at an inflection point or whether it is just stagnating.

I did pick up some shares of a stock trading below two-thirds of net current asset value. Right after I picked up the shares, the price promptly dropped 15% the next day. I kept my wits and doubled my position at the new low. I always find it mentally challenging to double down on a position so quickly, but it often proves to be the wise thing to do.

I also picked up an odd lot tender offer. However, I made an error this time. I learned that if you participate in tender offers for foreign company shares you have to be aware of potential tax withholdings. Foreign taxes can be imposed even in a tax sheltered account, like Coverdell Education Savings Account, which is what the Special Situations Real Money Portfolio is. My plan on this position will be to hold it until it produces a slight gain and then sell it before the tender offer expires. If the share price falls substantially before then, I’ll tender the shares and face the 15% tax withholdings. Live and learn.

Overally, the Special Situations Real Money Portfolio is up 155.81% since inception on October 19, 2004. The internal rate of return or average annualized rate of return is still an impressive 29.07%. 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.

Since the portfolio’s inception on October 19, 2004, my total return at the end of January 2010 was 158.8%.  The average annualized rate of return has been an impressive 30.12%

The main development at the end of January was the increase in cash in the portfolio. My cash position has increased to $22,196.00.  That’s primarily due to two reasons. First, I was cashed out of my large position in Sun Microsystems and my small position in MAXXAM. Second, there haven’t been too many good opportunities to redeploy cash.

Back on December 14, 2009, I bought 210 shares of MAXXAM (MXM) at $10.45 per share. MAXXAM planned to go private via a reverse/forward stock split. Shareholders with less than 250 shares would be cashed out for $11.00 per share. I was cashed out on January 22, 2010 and I received $2,310 for my 210 shares. My net profit on that transaction came to $108.55. The return was 4.93% for that 40 day transaction. I estimated the average annualized rate of return for this transaction to be 45%.

I was also cashed out of the 1,000 shares of Sun Microsystems (JAVA) in the Special Situations Real Money Portfolio on January 28, 2010. I purchased shares of Sun Microsystems on multiple occasions. First, I bought shares of Sun Microsystems October 2, 2009. I picked up a 1,000 shares for $9.01 on that trade. Second, I bought 600 shares of Sun on October 23, 2009 for $8.40 per share. I went on to sell those 600 shares for $9.23 per share on December 14, 2009. In total, I made $967.00 on all these trades. That cames to a 6.88% return. Looking at the internal rate of return over all those trades, I calculate an annualized rate of return of 29.54%. That’s pretty good for a simple merger arbitrage play with no leverage.

You can follow my latest research and see the latest trades in the Special Situations Real Money Portfolio by subscribing to my premium service, Fat Pitch Financials Contributors Corner. As a member of Contributors Corner, you will also gain access to my extensive archive of special situations and workout opportunities, and you will become a member of the active forum community, which shares new opportunities and discusses the latest developments on the stocks we are following.

Disclosure: I no longer own shares of Sun Microsystems (JAVA) or MAXXAM (MXM).

My overall annualized rate of return since inception is 30.75%. The Special Situations Real Money Portfolio started on October 19, 2004 with just $2,000. Each year since then, I’ve added the maximum Coverdell Education Savings Account annual contribution of $2,000. The total amount I’ve invested in this account is $12,000. Given that the Special Situations Real Money Portfolio ended 2009 with a total value of $30,938.09, my total profit as of December 31, 2009 is $18,938.09. The total return since inception is 157.30%. I hope to maintain this record of performance for the next eleven year until my son starts college.

Stepping back a bit, I’d like to talk a bit about how last month went. As you might recall, the Special Situations Real Money Portfolio in November ended with a balance of $26,972.91. I made a $2,000 deposit last month. The portfolio had a balance of $30,938.09 when the market closed on December 31, 2009.  Adjusting for the deposit, the portfolio gained 6.78% in December. As of December 31, 2009, the Special Situations Real Money Portfolio held the following positions:

If you want to review all the trades of this portfolio and my special situations research, subscribe to Fat Pitch Financials Contributor’s Corner. As a premium member, you will be notified of new trades in the Special Situations Real Money Portfolio, have access in all the research used to find special situations opportunities for this portfolio, and be able to participate in the active forum composed of fellow savvy investors interested in special situation opportunities.

Disclosure: I own shares of MAXXAM (MAXX), 3Com (COMS), Sun Microsystems (JAVA), Kid Castle Educational (KDCE), Sunstone Hotel Investors (SHO), and Western Sizzlin (WEST).

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.

This little investment experiment worked out much better than I ever dreamed it could. In fact, the results were so good it drew a lot of traffic to the going private transaction table I maintained here on the blog. It seemed that as soon as I posted a deal on the going private transactions table, the profit margins would evaporate.

I also became worried that some of the attention would make it back to the companies that were going private. There is always the danger that they could restructure their offers to the detriment of small individual investors. Therefore, I decided to put the going private transaction list behind a password wall and I created the premium service that I now call Fat Pitch Financials Contributors Corner. In Contributors Corner, I still maintain the going private transaction list and I also now track odd-lot tender offers, cash mergers, spinoffs, net-nets, and manage an active members only forum dedicated to discovering and discussing special situations.

This past month, the Special Situations Portfolio held steady. As I reported last month, the Special Situations Portfolio closed out September with a balance of $26,594.77. When the market closed on October 30, 2009, this account was worth $26,235.05. That’s down 1.4% for the month. Most of that decline can be attributed to one merger arbitrage opportunity that I recently entered, which has subsequently declined in price.

The year-to-date performance for the portfolio remains a strong 41.38% 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 162% as of the close of business on October 30, 2009. The average annualized return since inception remains an amazing 29.0%.

I entered three new positions this month. The names of those stocks are available to members of Fat Pitch Financials Contributors Corner. They include two merger arbitrage plays and one small going private transaction.

I only completed one transaction in October and it involved New Horizons Worldwide (NEWH). Back on April 20, 2009, I bought 24 shares of New Horizons Worldwide at $0.56 per share. My total cost for this tiny transaction was $20.39. This reverse/forward stock split going private transaction was expected to pay out $1.85 per share in cash to shareholders holding less than 25 shares. There was not much profit potential in this transaction, but I thought it would make for a great learning opportunity for new special situation investors. I only picked up these shares when the price dropped significantly down to $0.56. Limit orders are critical on these types of trades given the low liquidity. On October 9th, I was finally cashed out. I received a total of $44.40 for my 24 shares.  That comes out to a 118% return in less than six months. It’s hard to turn down that kind of return, even if the overall payout is only $24.01.

I hope next month I’ll be able to share the results of some larger transactions. Until then, you can track my current trades by becoming a premium member of Fat Pitch Financials Contributors Corner.

Disclosure: I no longer own shares of New Horizons Worldwide (NEWH).

The year-to-date return on the portfolio is now up to 43.3%.  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 166% as of the close of business today. The average annualized return since inception is now an amazing 30.2%.

Let’s take a look at some of the transactions that took place this past month. On August 14, 2009, I bought 249 shares of Zareba Systems (ZRBA) for $3.65 per share. Zareba Systems is planning to go private via a reverse stock split followed by a forward stock split. The company plans on cashing out shareholders holding less than 250 shares. Shareholders holding less than 250 shares will be given $5.20 per share in cash when the reverse/forward stock split occurs. On September 10th, the company decided to call off the deal. On the morning of September 14th, I sold the 249 shares of Zareba Systems (ZRBA) for $4.9001 per share. I made a nice net gain of 32.5% on this transaction ($297.37 it total profit). That’s extremely good (and lucky) given that this going private transaction was canceled.

Also on September 14th, I sold all 1,500 shares of Heely’s (HLYS) in the Special Situations Real Money Portfolio at $2.75 per share. Shares of Heely’s were up almost 20% on September 14, 2009 with no real news, so I thought it would be prudent to sell, especially considering $2.75 is close to my original calculation of $2.96 in net current asset value per share. It is likely that Heely’s NCAV has declined since my original estimate and I’m not comfortable holding this company above its liquidation value. I originally bought those 1,500 shares on May 20, 2009 at $1.83 per share. My cost basis is $2,751.95. I received $4,118.05 in proceeds from the sale. That’s $1,366.10 in profit from that investment, which comes out to a 49.6% net gain in less than four months.

At the end of September, I now find myself with a relatively large cash balance of $22,950.61. Market conditions are changing and hopefully the new wave of M&A activity will help me find some new opportunities to deploy my cash. However, I want to avoid taking on too much market risk. I think the economy could go either way at this time, so I’m going to remain cautious.

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.

Disclosure: I no longer own shares of Zareba Systems (ZRBA) or Heely’s (HLYS) at the time of publication.

At the end of August, the portfolio was up 8.6% since the end of June.  Better yet, the Special Situations Real Money Portfolio was up 38.0% year-to-date on August 31, 2009. That crushes the S&P 500 year-to-date total return of 14.97% over the same period.

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 156% as of August 31, 2009.  The average annualized return since inception is now an amazing 29.62%. Given the devastating market collapse of 2008-2009, I can now confidently say that the Special Situations Real Money Portfolio has been the most successful financial experiment of my life. This experience has altered my outlook on investing.

Let’s take a look at some of the transactions that took place this past summer. First, I bought 99 shares of Greenville Federal Financial Corp. (GVFF) at $4.90 per share on July 9, 2009. The company plans on going private through a tender offer. On July 16, I turned around and sold those 99 shares for $6.45 per share. I made a quick $139.53, a 28.3% return on that eight day investment.

Next I picked up 499 shares of Collectors Universe (CLCT) by accident on July 13, 2009 for $4.52 per share. This purchase occurred after the tender offer expired, and shares of CLCT have traded down to $4.10 right after I bought the shares. I forgot to lift a limit order I had placed several weeks earlier to purchase Collectors Universe. It was a careless mistake. On July 28, 2009, I sold 100 shares of Collectors Universe (CLCT) for $4.25 per share and then on July 31st I also sold the remaining 399 shares for $4.25 per share. All told, this little mistake cost the Special Situations Real Money portfolio $155.65. The return on that botched move was -6.9%.

On July 20th, I sold 2,000 shares of En Pointe Technologies (ENPT) for $2.38 per share. After that trade, I still had 3,000 shares of ENPT in the portfolio.  On August 11, 2009, I received $7,500 for the remaining 3,000 shares of En Pointe Technologies (ENPT). I got the expected $2.50 per share cash out for the En Pointe Technologies. I originally bought these 3,000 shares of En Point Technologies on March 31, 2009 for $2.06 per share. My total profit from this transaction came out to $1,320. That’s a nice 21.4% return for this straight forward going private transaction merger.

I few new developments occurred earlier this month. I’ll update you on those transactions in early October. If you want to know what those transactions were and want to see my current holdings, I recommend that you subscribe to Fat Pitch Financials Contributors Corner. A subscription to Contributors Corner will also gain you access to my current special situations research, the archives of all the past deals covered, and the intelligent community discussion among current members.

Disclosure: I no longer own shares of Greenville Federal Financial Corp. (GVFF), Collectors Universe (CLCT), or En Pointe Technologies (ENPT) at the time of publication.

The year-to-date return for the Special Situations Real Money Portfolio was 27.07% on June 30, 2009. The S&P 500 has returned less than 3.16% so far this year. I’m trouncing the market with my unique portfolio of special situations.

Looking back at the overall performance of this portfolio since inception, the total return is a whopping 135.79% since I started this Coverdell Educational Savings Account for my son on October 19, 2004. The annualized growth rate has now climbed to 28.29%. I believe that is the highest annualized growth rate I’ve ever reported and exceeds my outrageous goal of maintaining a 25% rate of return.

A couple of key events in June pushed the portfolio to new heights. You might recount XTENT (XTNT) was sold on June 4th. My $1,503.86 investment in this net-net on May 27, 2009 produced a profit of $1,489.11. That 99.0% total return was amazing, but I was left regretting I didn’t invest more in XTENT and I still wish I held out for the much higher prices that stock fetched shortly after I sold.

In addition to investing in a net-net, I also completed two tender offers for closed-end funds. In May, Neuberger Berman announced that it would be conducting a tender offer for its family of closed-end funds. Neuberger Berman was offering to pay 98% of NAV, and best of all, odd lot positions would not be subject to proration if the tender offer was oversubscribed. I bought 99 shares of Neuberger Berman Intermediate Municipal Fund (NBH) on May 6, 2009 at $12.51 per share for a total cost of $1,245.44. I also bought 99 shares of Neuberger Berman Dividend Advantage Fund (NDD) on May 14, 2009 at $6.71 per share for a total cost of $671.24.

On June 9, 2009, I received $13.46 per share in cash for the 99 shares of Neuberger Berman Intermediate Municipal Fund that I tendered. When those shares were cashed out, I received $1,332.54. However, I also got charged a $25 fee, but then on June 15, 2009 I also received a dividend of $5.37. The bottom line is that I netted $67.47, a 5.4% total return. If I assume that I received all the cash on June 15th, my average annualized rate of return for this closed-end fund odd lot tender offer came out to 48%.

On June 9, 2009, I received $7.76 per share in cash for the 99 shares of Neuberger Berman Dividend Advantage Fund (NDD) that I tendered. When those shares were cashed out, I received $768.24. However, I also got charged a $25 fee, but then on June 15, 2009 I also received a dividend of $6.44. The bottom line is that I netted $78.44, an 11.7% total return. If I assume that I received all the cash on June 15th, my average annualized rate of return for this closed-end fund odd lot tender offer came out to 129%.

While these two tender offers didn’t boost the overall balance of the Special Situations Real Money Port by much, they were still profitable and good practice for future tender offers that could potentially generate much larger returns. To keep up with the latest moves of this portfolio, consider subscribing to my premium service, Fat Pitch Financials Contributors Corner. Contributors Corner also has the complete transaction history of the Special Situations Real Money Portfolio. There you will also find my weekly list of stocks trading below two-thirds of net asset value, a list of current odd-lot tender offer opportunities, and much more.

Disclosure: I do not currently own shares of Neuberger Berman Intermediate Municipal Fund (NBH), Neuberger Berman Dividend Advantage Fund (NDD), or XTENT (XTNT).

XTENT is a development stage medical device company focused on developing and commercializing customizable drug eluting stent systems for the treatment of coronary artery diseases. Based on the March 31, 2009 balance sheet, XTENT’s net current asset value is $0.46 per share and its book value is $0.53 per share. Net cash per share is about $0.40 per share. Insiders own over 60% of shares.

Management indicated on March 15, 2009 in a preliminary proxy that they estimate the amount ultimately distributed during the proposed business liquidation will be between approximately $0.11 and $0.40 per share, assuming the company is unable to sell its intellectual property. At the time, I thought there was a decent probability that the company would be able to sell some of its intellectual property, and thus boost the ultimate payout. I also thought there was the potential that someone would want to buy this company as a corporate shell.

I picked up the 5,000 shares of XTENT (XTNT) on May 27th at just under $0.30 per share for the Special Situations Real Money Portfolio. I shared news of my purchase with members of my premium Fat Pitch Financials Contributors Corner service. My total cost for these shares came to $1,503.86. I decided to buy these shares because XTENT was trading at less than 2/3 NCAV and the company also recently announced that it would be liquidating.

The 5,000 shares of XTENT (XTNT) were short lived in the Special Situations Real Money Portfolio. I made the mistake of keeping a limit order open to sell the shares at $0.38. I placed that limit order on June 3rd, since it appeared the shares might hit that price on no news the day before. I was also getting nervous about off balance sheet liabilities that I hadn’t originally accounted for and was more than happy to sell my shares if the stock approached $0.40 without news. Well, I guess there was news that was forthcoming.

News happened and I wasn’t quick enough to react. On June 4th, my shares were sold at the open for $0.60 per share. News broke that morning that the company received conditional approval from the FDA for an Investigational Device Exemption authorizing it to begin its pivotal clinical program for its Custom NX® drug eluting stent system. The market liked this news and sent shares of XTENT soaring.

When I sold the shares on June 4, 2009, I received $2,992.97 net of costs. My total profit came in at $1,489.11 for this investment. That comes out to a total return of 99.0%. The average annualized return was 4,016% for this 9 day investment.

I should have been thrilled by this performance. However, I suffered some sellers remorse. Shares of XTENT continued to climb until they hit a high of $2.69 on June 5, 2009. The momentum traders really hit this stock hard. However, since there has been no new news, shares have traded down significantly and closed today at $1.31, which around what I safely estimate the shares to be worth if the company is liquidated and the intellectual property is sold off. I think the lesson I learned here is not to underestimate the potential for momentum investors to drive up the price of a penny stock net-net.

I’ve recently been producing a weekly table of stocks trading below two-thirds of net current asset value and sharing it on Fat Pitch Financials Contributor’s Corner. Consider subscribing to this very affordable service to participate in our discussions of these great opportunities, and also gain access to going private transactions, odd lot tender offers, mergers, other special situations, and the current trades of the Special Situations Real Money Portfolio in the premium portion of my site.

The year-to-date return for the Special Situations Real Money Portfolio is 18.25%. The S&P 500 has returned less than 3% so far this year. I’m trouncing the market with my unique portfolio of special situations.

Looking back at the overall performance of this portfolio since inception, the total return is a whopping 119.44% since I started this Coverdell Educational Savings Account for my son on October 19, 2004. The annualized growth rate has now climbed to 26.43%. I believe that is the highest annualized growth rate I’ve ever reported and exceeds my outrageous goal of maintaining a 25% rate of return.

Let’s take a look at some of the completed transactions in May that helped me acheive this amazing performance. I started off the month investing in two of the Neuberger Berman closed end funds. A tender offer was announced for this family of closed end funds. The goal of the tender offer was to reduce the discount to net asset value for these funds by offering to buy up to 10% of outstanding shares at 98% of net asset value. Best of all, odd lot holders (holding less than 100 shares) would not be subject to proration. I placed several low ball limit orders in for these Neuberger Berman funds and I ended up getting 99 shares of Neuberger Berman Intermediate Municipal Fund (NBH) for $12.51 on May 6th and 99 shares of Neuberger Berman Dividend Advantage Fund (NDD) for $6.71 per share on May 14th. The tender offer expired on May 29th and I should be getting cash for each of these positions shortly. I’ll report on how profitable these trades turned out when I get the final numbers.

On May 22nd I sold all 1,600 shares of Wilshire Enterprises (WOC) in the Special Situations Real Money Portfolio for $1.70 per share. I originally bought these shares on April 3, 2009 for $1.51 per share. I decided to buy shares of Wilshire Enterprises after the company agreed to conduct a future tender offer for at least 4 million shares at $2.00 per share as part of an agreement with activist investors Full Value Partners LP and Bulldog Investors. There are only 7.93 million shares outstanding, so proration shouldn’t be too bad. I decided ahead of time to sell the shares if the price ran up, especially since it was recently revealed that the tender offer is not planned to happen until late this summer. I sold when the stock jumped up, but I plan to watch this stock and potentially reenter this position if the price drops below my original entry point. I’m guessing it will.

For this first investment in Wilshire Enterprises, I made a net gain of just over $290. My total return was 12%. Given this investment took just 50 days, the average annualized rate of return comes to an amazing 87%.

Not all my investments turned out so perfectly in May. I had to sell out of my small position in Xedar Corp. (XDRC). I originally purchased 100 shares of Xedar on April 16, 2009 for $0.16 and a total cost of $22.95. Xedar was planning to go private via a reverse stock split where all shareholders holding less than 101 shares would be cashed out for $1.00 per share. However, on May 11, 2009, Xedar announced that it was able to reduce the number of shareholders of record below 300 without the reverse split and was therefore canceling the reverse split. I think this is the first time I’ve seen this happen. I was a bit worried I wouldn’t be able to sell my shares. Luckily the stock price drifted back up, and on May 20th, I sold these 100 shares for $0.30 share and received $23.04 after fees. I was glad I got shares of WOC at a low price, because commission costs made it difficult to exit this position without ending up with a loss.

Finally, I added two stocks selling at below two-thirds of net current asset value towards the end of May. We’ve been tracking stocks that are selling below two-thirds of net current asset value on Fat Pitch Financials Contributors Corner since last fall. Several Contributors Corner subscribers have made substantial returns on some of these stocks. Last month I booked a nice profit on Movado Group (MOV). This month I added 1,500 shares of Heelys (HLYS) at $1.83 per share and 5,000 shares of XTENT (XTNT) at $0.30 per share. Heelys recently had two board members resign in protest. One of the board members was the company founder and the other was his first cousin. XTENT has announced that it is planning to liquidate the company. It should be interesting to see how these net-nets play out.

You can follow the action and discussion of these stocks by subscribing to Fat Pitch Financials Contributors Corner. By becoming a subscriber, you’ll also get access to the complete portfolio history of the Special Situations Real Money Portfolio, announcement of new transactions, current special situation opportunities, community discussions, and full access of the archives that go all the way back to 2004. The discussions in those archives are jam packed with experiences and lessons learned that are invaluable, especially if you are new to investing in going private transactions, tender offers, split-offs, net-nets, and other odd ball opportunities.

Disclosure: I own shares of Neuberger Berman Intermediate Municipal Fund (NBH), Neuberger Berman Dividend Advantage Fund (NDD), XTENT (XTNT), and Heelys (HLYS). I no longer own shares of Wilshire Enterprises (WOC), Movado Group (MOV), and Xedar Corp. (XDRC).

For those of you unfamiliar with this portfolio, the Special Situations Real Money Portfolio is a Coverdell Educational Savings Account that I started for my son on October 19, 2004. I decided to focus this portfolio on special situations, or what Benjamin Graham called workouts. The majority of the earlier investments were in going private transactions, but as I have discovered new opportunities, I have branched out into tender offers, split-offs, mergers, net-nets, and other unique opportunities that I have researched or that have been shared by the Fat Pitch Financials Contributors Corner community.

So far this year, the Special Situations Real Money Portfolio has outperformed the indexes with a year-to-date return of 15.75%. The S&P 500 total return year-to-date has only been -2.5%.

Looking back at the overall performance of this portfolio since inception, the total return is a whopping 114.79%. The annualized growth rate has now climbed to 26.37%. I believe that is the highest annualized growth rate I’ve ever reported and exceeds my outrageous goal of maintaining a 25% rate of return.

Let’s take a look at some of the completed transactions in April that helped me acheive this amazing performance. First, I started off by opening an order for FortuNet (FNET) on April 6, 2009 at $2.74 per share. FortuNet first appeared in Contributors Corner in March as a stock trading below 2/3 net current asset value. Then on March 24th, a member of Contributors Corner notice that FortuNet was proposing to issue a $2.50 per share special dividend. Shares were only trading at $2.78 at the time, so the market was only valuing the company’s assets and business at $0.28 per share! I couldn’t believe it, so I looked over the business again and decided that this was a fat pitch worth swinging at.

It took me until April 9th to accumulate 549 shares of FortuNet. In retrospect, I probably should have raised my limit order a bit, since I really wanted to acquire 2,000 shares. There is always a fine line between maintaining pricing discipline and missing an opportunity.

Eventually, the market finally figured out this bargain. After the special dividend was approved by shareholders and a clarification was posted on April 19th regarding the record date of the dividend being April 27th, the price of FNET shares finally caught up with reality. On April 21, 2009, I decided to sell my 549 shares at $3.85 per share. At that price, FortuNet was selling significantly above its net current asset value and I was concerned that this gaming machine manufacturer faces significant headwinds in their industry given the current economic climate and decline in revenues in the casino sector. My total profit for this trade came to $588.48, a gain of 38.8% on my investment. The average annualize rate of return given it only took 16 days comes out to be a staggering 884%.

The next day, I decided to sell another position, Movado Group (MOV). Last month, I wrote about how Movado Group stock was trading below Graham’s 2/3 of net current asset value criteria. I bought 200 shares at $7.61 per share on March 23, 2009 and then I added another 200 shares at $7.15 on April 13th after the disappointing new quarterly report was released. I calculated the net current asset value of Movado Group to be $11.10 per share using the Jan 31, 2009 balance sheet. Therefore, two-thirds of the NCAV is $7.33, so I decided to buy more when the price of Movado shares dropped below that threshold. I’m sure Movado Group will continue to struggle with sales this quarter, so when Movado shares jumped up to $8.61 on April 22, 2009, I sold all 400 shares. My total profit for this trade came to $471.06, a 15.9% gain on my investment. Considering this investment all occurred within 31 days, the average annualize rate of return for this play came to 187%.

Finally, I received cash for a tiny little going private transaction reverse split for Grill Concepts (GLLC). As I mentioned last month, Grill Concepts was going private through a reverse stock split, where every 35 shares would become 1 share in the future. Those holding less than 35 shares will be getting $1.50 per share in cash. I bought 34 shares of Grill Concepts on February 24, 2009 for $0.35 per share and finally on April 22nd I received the cash for this deal. My total profit for this trade was $32.15 after expenses, but the net gain was 170.6%! Even though the total profit potential for this trade was tiny, I think it was perfect trade for someone who was just getting started in special situations and wanted to learn how these going private transactions work.

I must admit that it is getting harder and harder to find good special situation opportunities in this market. I currently hold $9,249.31 in cash, which is 43% of the portfolio. I will be working hard to uncover some new opportunities to put this cash to work. You can follow my efforts by subscribing to Fat Pitch Financials Contributors Corner. There you will also be able to see the complete history of the Special Situations Real Money Portfolio along with its current holdings.

Disclosure: I no longer hold shares in FortuNet (FNET), Movado Group (MOV), or Grill Concepts (GLLC).

On March 31, 2009, the Special Situations Real Money Portfolio had a closing balance of $18,800. This was up 4.5% from the February closing balance of $17,984.99. However, the S&P 500 was up an amazing 8.76% last month. While investing in special situations can reduce your risks and protect you from general market declines, it can be pretty difficult to keep up with a bull market using special situations, especially when opportunities are scarce.

Over the longer term picture, the Special Situations Real Money Portfolio continues to shine. Year-to-date, the portfolio was up 1.31% at the close on March 31st, while the S&P 500 was still down over 11%. Since inception on October 19, 2004, this little portfolio has cranked out 88% gains on our investment. The annualized rate of return climbed up to 22.11% at the end of March. These long term performance numbers trounce the general market returns over the same period by almost any metric you can think of including most professional hedge funds. I am increadibly proud of the way this portfolio has turned out. You too can create a similar portfolio by taking advantage of my research at Fat Pitch Financials Contributors Corner. Even though my performance numbers were amazing, I suspect several members of Contributors Corner are even performing better than I am.

Before I end, I would like to share with you my moves in this portfolio over the past month. The first and most disappointing decision I made this past month was to sell the 44 shares of Rohm & Haas (ROH) I held. As the Dow Chemical (DOW) buyout of Rohm & Haas appeared to be falling apart at the end of February, I convinced myself that this poor deal was unlikely to be completed at the original price of $78 per share. As news broke that Dow and Rohm & Haas were in some sort of settlement talks, I decided to bail out $63.97 on March 6th. I had originally bought ROH shares at $67.19 on December 19, 2008. Factoring in the one dividend I received, my total loss came out to $137.56, a 4% loss. While that loss is not terrible, it is killing me that the Rohm & Haas deal closed yesterday against all the odds for just below $79.

On March 23rd, I picked up a small position in the Movado Group (MOV). The shares of this luxury watch maker were selling below 66% of net current asset value (NCAV). I’ve been tracking stocks selling below 2/3 of NCAV on Contributors Corner over the past few months and I finally decided to include one in the Special Situations Real Money Portfolio. It will be interesting to see how this works out.

Towards the end of March I also had 34 shares of Grill Concepts get removed from my account. Grill Concepts is going private through a reverse stock split, where every 35 shares will become 1 share in the future. Those holding less than 35 shares will be getting $1.50 per share in cash. Since I bought 34 shares of Grill Concepts on February 24, 2009 for $0.35 per share, my final annualized return will be very high for this deal when I get the cash for these shares. That will probably happen sometime this month.

Finally, I picked up another going private transaction stock at the end of the month. This one is slightly different than Grill Concepts, since it will be done as a merger. All shareholders will be cashed out when the merger is completed. For now, I’m keeping this stock private for my premium members at Contributors Corner and for my Twitter followers.

Disclosure: I own shares of Movado Group (MOV) and Grill Concepts at the time this post was published. I do not own shares of Rohm & Haas or Dow Chemical at this time.