Sunday, April 22, 2007

Hit #163 (MedImmune)

MedImmune (MEDI) is being bought by AstraZeneca for $15.6 billion in cash. The offer, of $58/share, represents a gain of 136% over my average cost of $24.61.

AstraZeneca is grossly overpaying in this deal. On the bright side, at some point in the not-so-distant future, AstraZeneca will severely disappoint investors due to costs and failure to realize gains - that will be a good time to buy AstraZeneca shares. The stock has an attractive yield already, but it will be even more juicy on a substantial pullback. I will be sure to post when that happens.

MedImmune has been a target of activists, most notably Icahn. This will be a payday to remember for him!

Not too long ago, AstraZeneca also overpaid in a deal for Cambridge Antibody (Hit #96). The deal flow in this sector is not going to subside anytime soon.

Previous hit - OMI (#162)

More diversions

Another weekend post that is meant to reflect on things other than the mundane.

A reading update is long overdue on this blog, and I am still planning on a dedicated post on recent reads soon. For now, a couple of books will get a mention in this post.

Watching clouds: when was the last time you looked up to see clouds and marvel at the vareity of forms, or tried to estimate their height or guess the wind direction from them ? Don't recall ? Then it is time to peek at the skies the next time you are going nowhere in commuting traffic. The Cloudspotter's Guide by Gavin Pretor-Pinney can be your handbook. Check out the related website - The Cloud Appreciation Society. You can see my own attempts to capture clouds here - I still have a lot to learn!

More blog bling: I have been slowly adding a few more widgets to my blog page. These mostly link to my other interests and activities recorded elsewhere. There is the Kiva link on the right tracking micro-loans to enterpreneurs in the developing world, and there is the link to my picture portfolio at flickr. I have just added a Yelp link to reviews, of eating places and more. I am considering a few more similar additions. Since I am still experimenting with these, any feedback is more than welcome.

Bird-watching: Watching our avian friends has been something of a hobby for a long time, but until now I did not take it seriously enough to try and identify the species. You can see some of my bird pictures here. The patience needed to take bird shots, especially close-ups, is astounding. Having a high-zoom camera is a plus, but that is not enough. Learning to tip-toe, to move your camera in slow-motion and the ability to hold your breath and not blink, are all things you learn on your way to good bird shots. This was the toughest one so far, but I hope to get even better at it over time. I just started reading To See Every Bird on Earth: A Father, a Son and a Lifetime Obsession - the story of one of the greatest bird-spotters of all time. It is a stunning story. I will be glad if I get to see, in the wild, a tenth of the number of species, over my lifetime.

Here are a few more interesting links.
The City Birder: blog on bird-watching in Bronx/NYC.
SF birds: a list, linked to details, of birds seen in and around San Francisco.
Birds on stamps: a site dedicated to listing every stamp with a bird on it!

Electric Carnatic: I should warn you that like with any class of music, taste for Carnatic music is more acquired than anything else. Carnatic is the traditional/classical music of South India, with a history of atleast 300 years. Over time, a number of Western instruments, ranging from violin and saxophone to mandolin and the electric guitar have become part of the scene, along with the dozens of traditional instruments like tabla, veena and mridangam. For Carnatic on the electric guitar, there is none yet to match performances from Prasanna. Check out the Sindhu Bhairavi recital on YouTube - the recording is not clean, and there is background noise, but that doesn't do anything to diminish the beautiful sounds! For a clean sample without all that noise, check out Indra's Necklace, on Rhapsody. I hope you enjoy it.

Friday, April 20, 2007

Hit #162 (OMI)

Tanker operator OMI Corp (OMM) is being acquired by Teekay Shipping and Danish tanker operator TORM, who plan to split up the assets. The $2 billion cash deal turns out to be a $29.25/share offer, translating to a gain of 89.1% over my average cost of $15.47/share.

I had mentioned my position in OMM when CP Ships (Hit #59) was acquired. The other open position mentioned in that post was in Dry Ships (DRYS) whose shares have more than doubled since then.

At this point, it is hard to find a cheap shipping stock. The ones that seem cheap, like Double Hull Tankers (DHT) and Aries Maritime Transport (RAMS) are not quality buys. If I had to buy something in this sector now, I would go after the larger players, even though they are not takeover targets - these are operators like General Maritime (GMR), Frontline (FRO), Overseas Shipholding Group (OSG), Nordic American Tanker (NAT) and Ship Finance (SFL).

Seaspan (SSW), also mentioned in that earlier post, is a quality long-term buy, even after the sharp runup in recent months. Other shippers - Eagle Bulk Shipping (EGLE), Diana Shipping (DSX) and Genco Shipping (GNK) - all listed in the post on Maritrans (Hit #116) takeover are expensive now. Quintana Maritime (QMAR) may be the only one worth opening a position in, but I have some more research to do there.

Previous hit - Cutter & Buck (#161)

Hit #161 (Cutter & Buck)

Cutter & Buck (CBUK), which sells golf apparel and accessories, is being bought by Sweden's New Wave Group AB for $156 million in a cash deal. The offer, of $14.38/share, makes for a gain of 21.1% over my average cost of $11.87/share.

I had mentioned Cutter & Buck as a target when Russell (Hit #90) was acquired by Berkshire. Another player mentioned in the same post, Ashworth (ASHW), remains a target and still looks attractive.

That same post had also listed then recent IPOs like Volcom (VLCM), Under Armour (UA), Zumiez (ZUMZ) etc as potential long-term buys. While all of them are trading sideways now, I am not still ready to open more than just a token position in them. Quicksilver (ZQK), on the other hand, is starting to look very attractive.

Previous hit - Mobius (#160)

Thursday, April 19, 2007

Hit #160 (Mobius)

As forecast repeatedly in this blog, Mobius Management (MOBI) is finally being acquired. The buyer, Allen Systems Group Inc., is paying $10.05/share in a cash deal valuing the company close to $200 million.

This offer represents a premium of 53.2% over my average cost of $6.56/share.

I had picked Mobius as a target repeatedly in the past - when FileNet (Hit #111) was bought, and later when Stellent (Hit #123) was acquired, and then again, when Docucorp (Hit #135) was taken out.

To go with the regular recommendation, I accumulated Mobius shares over time, making it a larger than usual holding in my portfolio. I will be looking to reinvest the proceeds in a different sector.

Interwoven (IWOV), Vignette (VIGN) and to a lesser extent , OpenText (OTEX), remain targets, but they are all expensive at this point. A smaller, but much more speculative, buy would be OmTool (OMTL).

Previous hit - Tribune (#159)

Sunday, April 15, 2007

Hit #159 (Tribune)

Sam Zell found a good way to invest his proceeds from the sale of Equity Office. He is buying Tribune (TRB), in a $8.2 billion cash deal. The $34/share offer represents a profit of 24.13% over my cost/share of $27.39.

There was a bidding battle behind the scenes, and the other two billionaires who came close to clinching the deal, Ron Burkle and Eli Broad, may still come back with a higher bid. Ron Burkle recently cashed out in another deal - Wild Oats (Hit #147).

Sam Zell seems to have some plans for Tribune, that includes enhancing its online presence. He is right on target there. Newspapers, with their original content, and long-term relationships with advertisers, especially local/small businesses, should have found a way to convert their websites into money-making machines. But they failed, mostly due to lack of effort and allowed Google to get all those dollars.

It is hard to believe it today, but online newspapers can really get more ad-dollars than what they get now. It may take a Sam Zell to show how to do it.

New York Times (NYT), McClatchy (MNI), Dow Jones (DJ), Lee Enterprises (LEE), Gannett (GCI), E W Scripps (SSP), Journal Communications (JRN) are all, at varying levels, still good buys, either as buyout targets or as turnaround candidates. Most have attractive yields, that should compenstate for the potentially long holding period. If I had to pick one, I would go with McClatchy.

This deal marks another milestone in the curent frenzy of media buyouts. Clean Channel got an offer earlier (Hit #131) - that is also when I mentioned Tribune and New York Times.

Previous hit - ServiceMaster (#158)

Hit #158 (ServiceMaster)

ServiceMaster (SVM) is being bought by private equity group Clayton, Dubilier & Rice for $4.8 billion in a cash deal. The per-share offer of $15.63 makes for a gain of 36.27% over my average cost of $11.47. As with any high dividend yielding stock, a good portion of my gains were the result of (reinvested) dividends.

I had detailed my interest in Servicemaster long time ago in this post on service sector players.

There aren't any other players in this sector worth recommending right now. But Harte Hanks (HHS), the company behind those coupons in your mailbox, promoting offers/discounts from Servicemaster as well as other businesses, will be worth watching. I would like to see a significant pullback in the shares before I consider buying them.

Previous hit - Image Entertainment (#157)

Monday, April 09, 2007

Spring break!

No real break for me, but I thought I would post something to celebrate the great weather over the last few days, and which is set to continue. This is the best part of California living - the blue expanse, high sprinkled cirrus, flowers in bloom and all those wonderful creatures springing to life! So, don't forget to stop and smell the flowers.

As they say, life is much more than work and money. So before I make my next post on the urge to merge, here are a few amateur shots that I hope you enjoy as much I did taking them. Click on an image to see it in larger resolution - most of these are best viewed in much higher resolutions but I couldn't get the larger size images to fit well into the default blog layout.

Yearning for the big blue
On the springboard
Weekend workers
Honey sweatshop
The Blues Brothers
Organic candy floss
Yellow fever
Come on in ...
Showing some skin!
Sunbathing, wings stretched
Small, yet regal
The smaller big-cat
Nowhere but here
Another day, another wink
Pretty tail
Signature tail
A must see
Heading home for a refill
Two to tango
The other urge to merge
Not just for the birds and the bees
Not for a while
Closing in

Sunday, April 08, 2007

Hit #157 (Image Entertainment)

Image Entertainment (DISK) is selling itself to BTP Acquisition Inc. for around $130 million. The cash offer amounts to $4.4/share, a tiny gain of 8.1% over my average cost of $4.07.

Image was earlier a target of a hostile bid from Lions Gate Entertainment. While that would have been a good combine, the advance was rebuffed.

Cash for my Image shares purchase came from proceeds from the takeover of E-Loan (Hit #57), making for a minor bump from the original gains. I will be looking at investing cash from this buyout into Lions Gate (LGF) as it still remains a target for major Hollywood studios. I have been looking at Lions Gate for quite a while now, with an earlier mention made in this post.

Previous hit - Sierra Health (#156)

Hit #156 (Sierra Health)

Sierra Health (SIE) is being bought by UnitedHealth for $2.6 billion in a cash deal. This offer, of $43.5/share, makes for a gain of 31.98% over my average cost of $32.96.

My Sierra Health purchase was completely funded by proceeds from another takeover - that of Encore Medical (Hit #104), and so represents a nice compounding effect. Part of the gains from Encore went into National Medical Health Card Systems(NMHC).

The price being paid is lower than what I expected. There are some attempts by AMA to block the deal, but it is likely to get regulatory approval. I was hoping to see another bidder, say Aetna, pony up more, but the prospects have faded away.

I had made a post on Sierra when it came out with disappointing earnings news. I mentioned Aetna as the prospective buyer, with a price target of $44-50.

Aetna was also subject to a similar pullback, and I had recommended the stock then. Shares have since recovered strongly, and I would avoid buying more at this point.

One other player that I mentioned in the past was Molina Healthcare (MOH). I am still holding onto my shares bought then, enjoying the wild-ride! Molina today doesn't look undervalued anymore, though the company is cash-rich compared to its peers. Molina is still likely to see a 30% premium in a takeover. And, Michelle at footnoted has found an interesting reference to change in control in Molina's latest SEC filing. A buyout must be on the cards.

A few other playes in the sector, like Centene (CNC), Amerigroup (AGP) and National Medical Health Card Systems (NMHC) look attractive - I listed a few of them here. HealthSpring (HS), which went public last year, is not cheap anymore. I would wait before adding to my position there.

Previous hit - MapInfo(#155)

Tuesday, April 03, 2007

Hit #155 (MapInfo)

MapInfo (MAPS) is being bought by Pitney Bowes (PBI) for $406 million in cash. The offer of $20.25/share represents a gain of 105% over my average cost of $9.88.

I would have welcomed a stock swap as Pitney Bowes, especially at an effective discount and hence a higher real yield, is a great buy and hold forever stock. For long-term investors Pitney Bowes is still a good buy.

I mentioned MapInfo when @Road (Hit #136) got acquired. One other mapping service provider cited in that post, Navteq (NVT), a Philips spinoff, remains a buy today.

Ituran (ITRN) and LoJack (LOJN) also good as long term growth plays, but be prepared to add at lower prices.

Previous hit - WebEx(#154)

Hit #154 (WebEx)

WebEx (WEBX) finally got acquired by Cisco for $3.2 billion in a cash deal. The offer of $57/share represents a gain of 164% over my average cost of $21.55.

This was one of my many tech buys in 2002-2003 after the tech bust. This offer from Cisco is frankly much higher than anything I had imagined for WebEx. Cisco is overpaying, but the deal could still be a transforming one for the buyer.

Cisco's own high-end video-conferencing solution released recently was very well received. WebEx will complement it on the lower-end.

Two other companies to watch in this sector are Polycom (PLCM) and Radvision (RVSN). I wouldn't recommend buying either one right now.

Previous hit - Dollar General(#153)