Special Situations Real Money Portfolio March 2009 Update

March was a fairly quiet month for the Special Situations Real Money Portfolio. Only a few trades took place this past month and the portfolio’s cash balance was quite high. This caused the portfolio to miss out on some of the gains made in the general stock markets in March.

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.

3 thoughts on “Special Situations Real Money Portfolio March 2009 Update

  • April 2, 2009 at 1:49 pm

    There hasn’t been much M&A activity that we could take advantage of lately so I’ve been focusing on trying to get 5-10 quality net nets.

    I’ve had MOV on my watchlist since last year after I scanned it through Forbes 200 best small companies list and it does seem to be cheap. Havent looked at the NCAV numbers yet.

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