In CG/B, we are adding to two Healthcare names, using some of the cash we have raised recently to take advantage of the dip in prices this week.
In SSETF, we are adding modestly to our Financial exposure. This trade leaves the model about 8% above the S&P 500 in terms of exposure.
The acquisition of SYNO has allowed us to redeploy over 7% of the portfolio. We are adding to three names and establishing a new position. The adds all offer 60% or more to my one-year target, and I consider each of them a possible acquisition candidate. In each case, the stock is now above average in size. The new buy is a name that we traded successfully in 2009. After we sold it, it proceeded to double before round-tripping. In any event, this Technology company offers about 47% to my one-year target, which is still well below the high a year ago. I believe that the growth prospects are strong for this unique company and find the valuation compelling. Keeping with the theme, I include this company as a potential acquisition candidate as well.
For taxable investors, you might choose to defer the sale of SYNO in order to capture a long-term gain potentially or to defer the recognition of the gain until 2012. I have reviewed the proxy that was filed yesterday. BAX approached SYNO. Clearly, they are serious, and I would expect that they will close the deal, but they have the right to terminate if they find an "adverse material effect" or there is a regulatory constraint. The latter is almost impossible, but the former is always a small risk. There is always a small chance another bidder could emerge, in which case SYNO would have to pay about $10mm (<$1 per share). Given that the stock is trading about 1% below the $28 bid for a deal that settles in about 3 months, I would suggest that the current price reflects very little risk of the deal not closing and maybe a small potential for a higher bid. My best guess is that the deal closes at $28 in March, which gives you the chance to delay sale if that fits your needs.
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