I would close this pair trade. Microsoft has been stuck in a rut for a decade, and the risk of a buy-out premium on Yahoo! is not worth the risk on the short side.
Long Amazon/Short Barnes & Noble
Speaking of acquisition risk, the
Barnes & Noble
pair trade has been sabotaged by the bidding up of Barnes & Noble by a potential acquirer. Barnes & Noble is up nearly 50% since Dec. 3. Amazon has gone up as well in the same period (up 6%) but not nearly enough to keep returns in this pair trade on the positive side.
This pair trade should be closed.
Long Caribou/Short Starbucks
The coffee house battle continues with
(SBUX - Get Report)
making a solid recovery over the last six months. Since I recommending selling it short on Dec. 22, Starbucks has gained 6%. Tiny rival
also gained value in that time, adding 7% to its market capitalization.
Investors in this pair trade have made a small gain. I'm still skeptical of Starbucks and its potential for future growth. Long term there is simply more for Caribou to accomplish. I like this pair trade and would keep it intact.
Long Sirius XM/Short Cumulus Media
Who said pair trades are boring? Investors can make big money when placing a pair trade that delivers on both the long and short side of the equation. That has been the case in spades with my long
Sirius XM is up 22% and Cumulus Media is down 24% since Dec. 22. Combined, the net result for investors is a huge gain. Clearly the demise of terrestrial radio has had a negative impact on Cumulus, while satellite radio continues to gain traction.
The trend will likely play out for the foreseeable future, but I am recommending that investors close this pair trade. Locking in big gains is never a bad idea.
To see these stocks in action, check out the
Pair Trades Update
-- Written by Jamie Dlugosch in Minneapolis.
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