My portfolio is up 15.75% for the first six months of 2017, pulling up my since inception IRR to 23.74%, and comfortably ahead of the S&P 500's 9.34% gain so far this year. Significant winners have been Tropicana Entertainment, MMA Capital, Pinnacle Entertainment and Resource Capital, the only significant loser has been New York REIT.
- ILG Inc (ILG): In hindsight, this was one of my favorite special situations of the past several years. ILG (f/k/a Interval Leisure Group) had entered into a reverse morris trust transaction with Starwood prior to the announcement of Starwood's merger with Marriott, thus those that wanted to play the merger arb on the Starwood/Marriott transaction had to short out both Marriott and ILG against Starwood creating an uneconomic selling pressure on ILG's shares. Since the deal has closed, ILG has run up well over 100%, I unfortunately sold a little too soon in the low $20s as ILG is now being bid up under speculation of a merger with Marriott Vacations Worldwide (VAC). I'll be looking closely for ideas like this in the future, something similar was the Dell buyout of EMC/VMWare which created a coiled spring in VMWare stock that's caused the DVMT tracker to do very well too.
- Actelion (ALIOY): The Actelion/J&J deal closed and the development stage biotech company that was created out of the merger, Idorsia, has done very well too. I bought the unsponsored ADR, there was a short week or two there when the shares dropped and people started speculating on why and if withholding taxes were going to be an issue, I got scared out of my position, ended up making a small amount of money but left some on the table.
- CSRA (CSRA): CSRA is the government services spinoff of CSC, with CSC I had the right idea at the time of the spinoff, CSC was setup to be sold and it was earlier this year when it merged with a division of HP Enterprises in a reverse morris trust to create DXC Technology (DXC). I haven't spent much time on DXC, but CSC turned out to be the better side of the CSC/CSRA split. I ended up selling CSRA earlier this spring in a slight fit as I didn't realize pension income was being included in their "adjusted" EBITDA figure they were presenting. It caused the shares to look artificially cheap compared to peers and I just missed it, lesson learned.
- WMIH Corp (WMIH): The white whale of NOL shells, with over $6B in NOLs and apparently no dance partner in sight, it appears like the company's sponsor KKR is unable to find a deal that makes sense, they can walk in January, and will likely use that as leverage to strike an even more advantageous deal with WMIH. If a deal does happen in the meantime, there still could be money to be made after but I don't see a reason to wait around any longer.
- Miramar Labs (MRLB): Miramar Labs is another CVR opportunity, and even smaller than the others mentioned on the blog, but they make a medical device that's used to reduce underarm sweat and hair. It's more of a elective beauty and/or lifestyle product that is sold to plastic surgeons, spas, etc, and its treatments are paid in cash and not processed through insurance companies. Sientra (SIEN) is buying Miramar for $0.3149 per share upfront and $0.7058 per share in contingent payments for a total just over $1.02 per share. The contingent payments are a little unique, where the milestone is a cumulative net sales number with no deadline. Unlike the other CVRs that rely on an FDA approval, here Miramar already has an approved and commercialized product, so unless the sales flop going forward, the payout should occur, its just a matter of when. The big payout is for $80MM in sales, Mirmar did $20MM in sales last year, but they're seeing some growth, I'm modeling out a 3-3.5 year timeframe to hit the milestone payment which at current prices of around $0.55 per share generates a pretty nice IRR. Thanks to @yolocapital on Twitter for pointing it out to me.
- Sound Banking Company (SNBN): Sound Bank is a tiny North Carolina based community bank that is being acquired by another small bank but with high growth ambitions, West Town Bancorp (WTWB). There are many small bank mergers happening, if I was less capital constrained, or had a lower risk mandate I'd probably be diving head first into more of these as the spreads are fairly wide for what should be low risk deals. West Town Bancorp is offering $12.75 in cash or 0.6 shares of WTWB for each share of SNBN. With SNBN currently trading at $13.40, you could create shares of WTWB for $22.33 when they currently trade for $24.45. There is a cap on the cash/stock consideration, so proration is likely with the stock trading over the $12.75 cash payout, but it still seems/seemed like a good bet, the merger is expected to close in the third quarter.
- Interoil Corp (IOC) Contingent Resource Payment: I got bored and ended up trying this CRP/CVR the day or two before the merger with Exxon Mobil was completed, no view on how much natural gas is actually in PNG, so its a pure speculation that should be decided in the next quarter.
Disclosure: Table above is my blog/hobby portfolio, its a taxable account, and a relatively small slice of my overall asset allocation which follows a more diversified low-cost index approach. The use of margin debt/options/concentration doesn't represent my true risk tolerance.