Wednesday, November 14, 2012

A Little More To Do

After a quiet summer and early fall, there's been a little flurry of activity. I recently sold the last of my position in Magic Software ( MGIC ) @ $4.55, after owning it since late in 2008. This investment turned out fine, well exceeding my own expected hurdle rate.

This latest period of market volatility has provided a compelling merger arbitrage opportunity. These kind of special situations don't come around too often and can provide an above average rate of return over a short period of time. I've taken a position in the Canadian oil and gas company, Nexen ( NXY.TO ) @ $23.77. As you probably know, CNOOC ( Chinese state-owned oil company ), has offered $27.50/per share in cash (USD), to buy NXY. The big question making the headlines lately, is whether the government will approve the deal. All indications are that the deal will be approved. The Canadian government has only blocked 3 deals out of 27 in the last 30 years. The decision will be made this December.

Also, I've recently started a small position in a very large American company, that one could call the "ultimate fallen angel". This company is currently waaay out of favour, but has a bright future, now that many of it's problems ( not all ) are put behind them. There's little downside in this company over the long term, but the investing public has been slow to warm-up to the story. That won't always be the case. I'll welcome lower prices over the next little while as I build-out this position. I will provide more detail on this good business - soon.

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