Advanced Nutraceuticals cashed out

Well, I don't think anyone could be as pleased as I was to lose a half-million dollars. My shares of Advanced Nutraceuticals were cashed out on Oct. 5 at $4 a share. On an anualized basis, it was 144.12% and one day short of beating Major Automotive, which was 144.21% annualized, as my best investment.

I was thinking about the comparsion with the S&P 500 and it occured to me that Berkshire Hathaway might be a reasonable benchmark to strive for:

Date      S&P 500  Delta    IRA    Delta  BRK A
12/31/02* -11.37%  42.32%  30.95%  30.18%  0.76%
12/31/03   26.38%  -1.49%  24.89%   9.08% 15.81%
12/31/04    8.99%  -2.16%   6.84%   2.49%  4.34%
12/31/05    3.00%   3.23%   6.23%   5.42%  0.81%
10/05/06    8.41%  20.51%  28.92%  17.21% 11.71%
Total Gain 36.31% 102.96% 139.27% 102.16% 37.11%
Annualized  7.49%  15.07%  22.57%  14.93%  7.64%

* First reporting date is 06/23/02

In a little over four years, I've managed to outperform both the S&P 500 and Berkshire, which astounded me. I can't imagine that will continue for the next four years however, because Berkshire is tremendously undervalued. Starting this year, some of my performance will be based on the performance of Berkshire thanks to the share I own. Also, it isn't a fair fight since Mr. Buffett and friends must allocate billions of dollars and can't invest in tiny companies like Advanced Nutraceuticals or even tinyer opportunities like going-private transactions.

Half-millionaire

I just felt like crowing this morning, because my IRA has a market value over a half million dollars. Unfortunately, most of the balance is based on a single position, Advanced Neutraceuticals Inc. My 499 shares are trading at $1,025.000 for a grand total of $511,475.00. Sadly, my sell order online fails with the following message: "We are unable to process the order referenced above. This security is subject to a corporate action. Please call our Customer Service line if you need further assistance." In the crazy world of high finance, I'm bound to lose my first half million almost as quickly as I gained it.

P.S. There was a little bit of drama just before the shareholder vote. Fortunately, it seems to have worked out for me, though it wouldn't be the end of the world to have been left with a small, cash-flow positive company with manageable debt and insider-buying.

Why I bought Advanced Nutraceuticals

I've gotten a bit behind in my investment rationals, so before I forget, I better write this down. This is another going-private transaction that was initially priced at $3.20 a share for holders of fewer than 500 shares. On July 25, the offer was raised to $4 a share. Up to now, my rule has been to wait for a definative proxy before buying into these sorts of special situations, but I realized that raising the price of the offering is a similar signal that the transaction will happen. There's no particular reason a company should raise the offer unless the SEC thinks it is unfairly low, so once the offer is raised, there's a good chance the going-private transaction will be approved.