This is sort of a cheat. I purchased my shares of Facet Bitoech before launching this blog. It does highlight a few ways that I have diverged from the true religion of value investing, while still being a believer. What? I know and I haven’t even started drinking yet.

I purchased 200 shares of FACT on 4/23 at $8.95/share. It looked to me to be a pseudo Net Net stock. What does that mean? It means that when I bought FACT its liquidation value was slightly higher than I bought it for, but it didn’t have a traditional track record or characteristics of a true Net net stock, like a good revenue stream. It was also a spin-off of the drug development operations of PDL Biopharma, doing double duty for me.

There were also two potentially interesting catalysts. First, Roderick Wong had announced the intention of nominating four directors to board. As he has done elsewhere, he was interested in liquidating the company. But more interesting to me was that the Baupost Group,  run by the master, Seth Klarman,  had filed a SC 13D form which disclosed that they owned 4,374,407 shares of Facet, or about 17.8 percent of its outstanding stock. This form is usually used by activist investors, although Klarman said at that time that he wasn’t going to act in activist manner.

The Wong thing didn’t pan out. I had watched the stock fluctuate between the low 8′s to over 11.

Last Sunday, Facet announced a deal with Trubion Pharmaceuticals ” announced an agreement for the joint worldwide development and commercialization of TRU-016, a product candidate in phase 1 clinical development for chronic lymphocytic leukemia (CLL).” This deal did not make a lot of sense to me they could have simply purchased the whole company for less than the $100 million, Facet had committed themselves to.

On Wednesday of this week, shares of FACT had dropped to 8.28. I considered reloading another 200 shares. Klarman had decided to get involved in a activist fashion. The catalyst was finally here. But their valuation by my estimation coupled with the recent seemingly dumb deal with Trubion undermined my confidence. Not enough to sell what I owned, but enough to keep me from re-upping. You see I like having Seth Klarman on my side, but it is not a good enough reason to override my own valuation.

This morning Biogen offered Facet $14.5o cash for all shares. The price of FACT soared to well over $15. To some people this will become an arbitrage position. For me it was time to get out. One of my mantras is know when you want to get out. So, I sold all 200 shares at 15.34, for a real return of 71.%. This was a small time investor position with less than $1800 invested for over a $1200 gain.

Some of you will do the annualized thing. The S&P closed at 851.92 on 4/23. It closed at 1016.40 today. Do the math if you are interested in a comparison to the S&P 500. When I purchased FACT it was 14% of my IRA portfolio. Did it effect my IRA, of course.  But I am not retiring to Tahiti this weekend.  I would need to make a few thousand more trade like the Facet Biotech.

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