David Winters Comments on NV Energy
With Berkshire standing ready with cash in hand, the only apparent risks to this arbitrage were that Berkshire could walk away from the deal or that the deal would not be approved by government regulators. Given Berkshire's decades-long track record of seeing acquisitions through to completion and its $40 billion of available cash, we viewed the risk of them walking away as very low. We also considered regulatory approval to be extremely likely. Rather than earn 0.15% in short-term U.S. T-Bills, we deployed some of the Fund's cash into NVE shares. When the acquisition closed on December 20th, we had realized a gain of 2.5%, including dividends, in just over six months, a nearly 5% return on an annualized basis. While that return pales in comparison to what the S&P 500 returned in 2013, we were pleased to have a low-risk "cash alternative" which offered a return far in excess of what was available from traditional cash instruments. We believe that the availability of such a rewarding arbitrage opportunity is an indication of many market participants' preoccupation with high-risk, high-reward speculation in 2013. NVE was a classic non-correlated return opportunity; its return was completely independent of what the market was doing. When everyone is caught
From David Winters (Trades, Portfolio)' Wintergreen Fund (Trades, Portfolio)s 2013 message to shareholders.