- Crossroads Capital (XRDC) is soliciting a shareholder vote to convert to a liquidating trust, cash makes up about $1.40 of the $2.05 current share price, it may take a few years to fully liquidate but I assume much of the cash will be distributed to shareholders (technically unit holders) shortly after the liquidating trust conversion reducing the basis and pulling some of the potential return forward. I added a little more since I first discussed the idea, there might be some indiscriminate selling from those who don't want the illiquidity of a non-tradeable security ahead of the conversion.
- Another current position I recently added to is CSRA (CSRA) which is the U.S. government services spinoff of Computer Sciences Corp (CSC). I had the original idea right that CSRA should be sold after the spin and CSC held as it was the buyout candidate of the two (HPE is doing an Reverse Morris Trust with CSC) but ended up calling a poor audible and holding CSRA instead for tax reasons. CSRA is down 25-30% for little reason since then. The U.S. government has a budget for the first time in years and most government agencies (including the Department of Defense) have seen funding increases. Leidos (LDOS) is buying the services business of Lockheed Martin (LMT) later this year in a Reverse Morris Trust transaction (could be an interesting split off special situation) for 10x EBITDA, no reason that CSRA should trade for a couple turns below that.
- NexPoint Residential Trust (NXRT) has had a nice run recently on minimal news and is basically at my estimation of fair value in its current external management form. I want to continue to hold as I like the strategy and their target markets in the Southeast and Southwest but it's hard to fully commit to an external management structure (despite significant insider ownership) as the principal-agent problem is strong and management's best interests are often at conflict with shareholders. I've sold a little bit and will likely continue to do so, just being slow about it to hedge against Highland selling the company outright in the $20-22 range.
- The spread has come in on the American Capital (ACAS) deal with Ares Capital Corp (ARCC), but in the wrong way with ARCC falling since the deal was announced. After letting the deal settle in my head, I decided merger arbitrage isn't my strong suit so I sold around $16 and moved on.
- I ended up selling Gramercy Property Trust (GPT) this month around $9 after owning it for nearly five years, at that time it was a busted commercial mortgage REIT that held the junior debt and equity in three CRE CDOs that were in various levels of distress. The old board brought in Gordon DuGan and team in the summer of 2012 to transform the company into a net lease REIT focused on industrial and office properties. New management grew the company quickly through several large acquisitions and corresponding capital raises which was topped by the merger with Chambers Street late last year. The market didn't initially respond well to that deal, likely because of Chambers Street's previous private REIT status and corresponding messy asset base and unsophisticated retail investors. REIT mergers are great because of the scalability of the business, once a management team is in place, there's significant operating leverage. Gramercy was able to eliminate most of the Chambers Street expense structure and recycle the random assortment of office and industrial properties into a more streamlined portfolio that public REIT investors would assign a premium valuation. That process is far enough along and investors are once again giving Gramercy credit, I have the shares trading for about a ~6.5% cap rate, and given it's new larger size and wider coverage, just don't see a lot of additional alpha remaining.
- Sycamore Networks (SCMR) drew me in with it's large NOL asset and two activist investors who were looking to stop the ongoing liquidation and preserve the tax asset. However, the company is set on a liquidation and made an additional distribution during the first half of the year, making it even more unlikely that the tax asset can be monetized (and as we see with Par Pacific and others, even with management focused on the tax asset, not always easy to actually make a dent in it quickly). It was already a small speculative position for me and after the liquidation distribution it was even smaller, wasn't worth mental effort any longer and I sold for a small loss.
Disclosure: Table above is my blog/hobby portfolio, its a taxable account, and a relatively small slice of my overall asset allocation (most of which is restricted) which follows a more diversified low-cost index approach. The use of margin debt/options/concentration doesn't represent my true risk tolerance.