The Special Situations Real Money Portfolio closed out the month of May with a balance of $21,944.03. This is up 2.2% from the record breaking performance in April. While the S&P 500 returned an amazing 5.5% last month, I’m still more than happy with how I did in May.
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).