On Friday I made two transactions: I sold my remaining 550 shares of AHS (at $4.25) and reduced my MAS 2013 LEAPS by 25 contracts (sold at $0.80 per contract).
If you click on the "zz AMN Healthcare Services" label on the right you'll see AHS has been a lot of work, a lot of ups and downs, and very little profit. But I guess sometimes that's just how it goes, right? Anyway, although I still think the shares are undervalued, they were such a small % of my portfolio that it just wasn't worth holding them anymore.
The MAS LEAPS, on the other hand, have turned out really well over a relatively short amount of time. I bought 125 contracts at $0.45 about 2 months ago, so selling 25 of them at $0.80 is great! Unlike AHS, with MAS I'm just trying to be opportunistic and take advantage of the price Mr. Market is offering, so don't be surprised if I continue selling in the days/weeks to come.
The other reason for selling both AHS and MAS was to make my portfolio a little less risky. The market has rallied nicely since the start of Q4, and as a result the % of my portfolio in cash had fallen to the high 20's. However, after Friday's transactions my cash % is back in the low 30's, and if the market continues to rally I'll probably continue to trim back some positions.
Questions? Comments? Email mevsemt@gmail.com
Saturday, October 22, 2011
Sunday, October 2, 2011
Returns as of Q3 2011
Man, these last two quarters have been miserable! Not only have my returns been negative, but they've lagged the S&P too. Oh well, I guess this type of thing happens with a concentrated portfolio. Besides, over the last 5+ years I've managed to outperform the S&P by roughly 10% per year, so I'm still hopeful I'm doing something right! Anyway, here's a quick summary of where I stand for 2011:
I also included a waterfall graph that shows a little more detail. The blue bars are the beginning and ending balances, the green bars show appreciation/depreciation, and the red bars represent deposits (click image to enlarge):
So what about my holdings in particular? Well, in general I'm still cautiously optimistic. In fact, I think some of my holdings have gotten down right cheap, especially SHLD, JOE, and AIG. I'm also surprised we're seeing LUK trade this close to book value. I mean these guys have compounded book value at 20% per year for 3+ decades and there's no premium on the stock price whatsoever! Of course there's also plenty to be worried about; Europe's a mess, China's growth may be slowing, and Washington is slightly less functional then my 21-month-old daughter's daycare class. Anyway, below is a snapshot of my current holdings as of 9/30/2011 (click image to enlarge):
Questions? Comments? Email mevsemt@gmail.com.
- I came into the year with $126,967. During the year I've deposited $35,000 into my account. YTD my holdings have DEPRECIATED by $22,073, leaving me with $139,894 as of 9/30/2011.
- YTD my annualized IRR has been -19.4% vs. -15.0% for the S&P (assumes dividends are reinvested AND the $35K I deposited was used to buy additional SPY shares at that day's closing price).
Sunday, September 18, 2011
Light Commentary and Some Links
I'm going to try something a little different today. Recently there's been a handful of interesting articles/analyses/press releases on companies I own, so I thought I'd provide the links and do some light commentary around them.
First there's Terra Nova (TTT). As discussed in previous posts, the company is basically an investment vehicle for Michael Smith. But since no acquisitions have been made, owning TTT requires a bit of blind faith in Smith. In this vein, here's one of the best analyses I've found on his historical track record: http://seekingalpha.com/article/290755-15-for-15-years-michael-j-smith-s-outstanding-track-record?source=yahoo.
Then there's Sears. They're spinning off Orchard Supply, started selling Craftsmen tools at Costco, and hired a new CFO. Taken individually these may not sound like much, but taken together this may signify the beginning of a transformation from a retail operation to a brand/real estate/asset holding company. Here's a good blurb on the Craftsmen part: http://seekingalpha.com/article/292376-sears-holdings-externalizing-brands-could-be-major-catalyst-for-stock?source=yahoo. Here's the Wikipedia page on the new CFO: http://en.wikipedia.org/wiki/Robert_Schriesheim. Clearly, Schriesheim is a turnaround/restructure guy - my guess is Sears wouldn't have hired him unless this is their intent AND he wouldn't have accepted the job unless he judged there was a reasonable likelihood of succeeding. And lastly, if you're sick of my bullish sentiments, here's a good commentary with a bit more of an even keel: http://seekingalpha.com/article/292409-whether-we-should-throw-in-the-towel-on-eddie-lampert-and-sears-holdings?source=yahoo.
And what about JOE? Well, regular readers know I'm a huge fan of Bruce Berkowitz. In fact, his involvement with St. Joe is one of the main reasons I bought the stock (http://mevsemt.blogspot.com/2011/05/new-coattails-to-ride.html). Additionally, Berkowitz has been an investor in LUK (my largest holding) for 10+ years. So what's the connection? Well, LUK has done commercial/residential real estate development on the Florida panhandle, and JOE's recent appointments/hires of Brady, Bienvenue, and Keil all come from LUK. Frankly, it wouldn't surprise me to see LUK and JOE partner up sometime in the near future. Lastly, JOE has recently agreed to let Berkowitz acquire up to 50% of their shares (he currently owns 30%), so my guess is he's confident in their prospects.
Well, I hope you enjoyed the commentary and links! And I always like hearing from my readers, so feel free to email me with any comments or questions (mevsemt@gmail.com).
First there's Terra Nova (TTT). As discussed in previous posts, the company is basically an investment vehicle for Michael Smith. But since no acquisitions have been made, owning TTT requires a bit of blind faith in Smith. In this vein, here's one of the best analyses I've found on his historical track record: http://seekingalpha.com/article/290755-15-for-15-years-michael-j-smith-s-outstanding-track-record?source=yahoo.
Then there's Sears. They're spinning off Orchard Supply, started selling Craftsmen tools at Costco, and hired a new CFO. Taken individually these may not sound like much, but taken together this may signify the beginning of a transformation from a retail operation to a brand/real estate/asset holding company. Here's a good blurb on the Craftsmen part: http://seekingalpha.com/article/292376-sears-holdings-externalizing-brands-could-be-major-catalyst-for-stock?source=yahoo. Here's the Wikipedia page on the new CFO: http://en.wikipedia.org/wiki/Robert_Schriesheim. Clearly, Schriesheim is a turnaround/restructure guy - my guess is Sears wouldn't have hired him unless this is their intent AND he wouldn't have accepted the job unless he judged there was a reasonable likelihood of succeeding. And lastly, if you're sick of my bullish sentiments, here's a good commentary with a bit more of an even keel: http://seekingalpha.com/article/292409-whether-we-should-throw-in-the-towel-on-eddie-lampert-and-sears-holdings?source=yahoo.
And what about JOE? Well, regular readers know I'm a huge fan of Bruce Berkowitz. In fact, his involvement with St. Joe is one of the main reasons I bought the stock (http://mevsemt.blogspot.com/2011/05/new-coattails-to-ride.html). Additionally, Berkowitz has been an investor in LUK (my largest holding) for 10+ years. So what's the connection? Well, LUK has done commercial/residential real estate development on the Florida panhandle, and JOE's recent appointments/hires of Brady, Bienvenue, and Keil all come from LUK. Frankly, it wouldn't surprise me to see LUK and JOE partner up sometime in the near future. Lastly, JOE has recently agreed to let Berkowitz acquire up to 50% of their shares (he currently owns 30%), so my guess is he's confident in their prospects.
Well, I hope you enjoyed the commentary and links! And I always like hearing from my readers, so feel free to email me with any comments or questions (mevsemt@gmail.com).
Wednesday, September 7, 2011
Selling Cisco
Today I sold my 1,000 shares of Cisco. I originally purchased it back in February (http://mevsemt.blogspot.com/2011/02/buying-some-cisco.html) because I viewed it as "significantly more attractive than holding cash." So let's see, I purchased it at $18.88 (outlay of $18,875) and sold at $15.48 (proceeds of $15,476). Whoops...
Anyway, the main reason for selling CSCO is last week I purchased JCP. Basically, this was a sell-cheap-to-buy-cheaper trade out. Additionally, after buying JCP the % of my portfolio in cash had fallen to the low 20's, and selling CSCO brought it back up to the low 30's (a level at which I'm much more comfortable given today's environment).
Questions? Comments? Email mevsemt@gmail.com
Anyway, the main reason for selling CSCO is last week I purchased JCP. Basically, this was a sell-cheap-to-buy-cheaper trade out. Additionally, after buying JCP the % of my portfolio in cash had fallen to the low 20's, and selling CSCO brought it back up to the low 30's (a level at which I'm much more comfortable given today's environment).
Questions? Comments? Email mevsemt@gmail.com
Saturday, September 3, 2011
More retail? Great...
Many people, myself included, have a tendency to make investing a lot more complicated than it needs to be. IMHO successfully picking stocks can be broken down to two simple guidelines, 1) don't overpay and 2) make sure you're aligned with a capable and intelligent management.
These opportunities are rarely black and white, so you're usually left navigating the grey (for instance, how many times have you said "this stock is really cheap, but there are a few things I'd change about management?"). However, every once in awhile there's a fat pitch right down the middle, the only trick is you have to be ready to swing.
With that in mind, on Friday I bought 625 shares of J.C. Penney (JCP) at a price of $25.47, for a total outlay of $15,924. On a numbers basis alone, the price of JCP is somewhere between "cheap" and "reasonable." However, the real draw for me is both management's talent and alignment with shareholders.
First there's Bill Ackman, the activist/value investor who runs Pershing Square Capital Management. A little under a year ago he began acquiring shares, and now owns about 18% of the company. During this time he was also elected to the Board, and recently signed a new agreement that would allow him to increase his stake to 26% without triggering a poison pill. This new agreement is significant - you have a great investor with insider knowledge wanting to buy more stock - it's not much of a leap to conclude the stock is cheap. Then there's the alignment thing - Ackman's goal first and foremost is to earn a return for his limited partners at Pershing, so my guess is he's pretty focused on maximizing shareholder value at JCP.
Next there's Steven Roth, the chairman of Vornado Realty Trust (VNO). Through VNO Mr. Roth acquired shares and was elected to the JCP Board in tandem with Mr. Ackman. Vornado itself has an interesting history; it was a struggling retailer until Mr. Roth took control about 30 years ago. He closed down the retail operations and transformed it into a REIT, and since then the returns for shareholders has been spectacular (http://www.fundinguniverse.com/company-histories/Vornado-Realty-Trust-Company-History.html). Like Vornado JCP owns a significant amount of real estate, so I wouldn't be surprised to see some sort of real estate play here (although I think that's just part of the story).
Last but not least is Ron Johnson, the newly elected CEO of JCP slated to start in November. Mr. Johnson's claim to fame is the Apple retail store and the Genius Bar, but before Apple he was the VP of merchandising for Target. Mr. Johnson made over $100MM through stock options at Apple and now he's invested $50MM of his own money in JCP (in the form of about seven million warrants with a strike price of $29.92 and an expiration date in 2017).
So what's not to like here? In Ackman, Roth, and Johnson you have some of the most talented professionals in capital allocation, real estate, and operations/merchandising, respectively. They've all invested significant amounts of their own money, and by buying JCP stock I've directly aligned myself with them. Of course that's no guarantee of success, but I'd say the odds are tilted in my favor!
Questions? Comments? Email mevsemt@gmail.com.
These opportunities are rarely black and white, so you're usually left navigating the grey (for instance, how many times have you said "this stock is really cheap, but there are a few things I'd change about management?"). However, every once in awhile there's a fat pitch right down the middle, the only trick is you have to be ready to swing.
With that in mind, on Friday I bought 625 shares of J.C. Penney (JCP) at a price of $25.47, for a total outlay of $15,924. On a numbers basis alone, the price of JCP is somewhere between "cheap" and "reasonable." However, the real draw for me is both management's talent and alignment with shareholders.
First there's Bill Ackman, the activist/value investor who runs Pershing Square Capital Management. A little under a year ago he began acquiring shares, and now owns about 18% of the company. During this time he was also elected to the Board, and recently signed a new agreement that would allow him to increase his stake to 26% without triggering a poison pill. This new agreement is significant - you have a great investor with insider knowledge wanting to buy more stock - it's not much of a leap to conclude the stock is cheap. Then there's the alignment thing - Ackman's goal first and foremost is to earn a return for his limited partners at Pershing, so my guess is he's pretty focused on maximizing shareholder value at JCP.
Next there's Steven Roth, the chairman of Vornado Realty Trust (VNO). Through VNO Mr. Roth acquired shares and was elected to the JCP Board in tandem with Mr. Ackman. Vornado itself has an interesting history; it was a struggling retailer until Mr. Roth took control about 30 years ago. He closed down the retail operations and transformed it into a REIT, and since then the returns for shareholders has been spectacular (http://www.fundinguniverse.com/company-histories/Vornado-Realty-Trust-Company-History.html). Like Vornado JCP owns a significant amount of real estate, so I wouldn't be surprised to see some sort of real estate play here (although I think that's just part of the story).
Last but not least is Ron Johnson, the newly elected CEO of JCP slated to start in November. Mr. Johnson's claim to fame is the Apple retail store and the Genius Bar, but before Apple he was the VP of merchandising for Target. Mr. Johnson made over $100MM through stock options at Apple and now he's invested $50MM of his own money in JCP (in the form of about seven million warrants with a strike price of $29.92 and an expiration date in 2017).
So what's not to like here? In Ackman, Roth, and Johnson you have some of the most talented professionals in capital allocation, real estate, and operations/merchandising, respectively. They've all invested significant amounts of their own money, and by buying JCP stock I've directly aligned myself with them. Of course that's no guarantee of success, but I'd say the odds are tilted in my favor!
Questions? Comments? Email mevsemt@gmail.com.
Monday, August 22, 2011
Another Real Estate/Housing/Construction Stock... Really?!
Between Sears and St. Joe you might've thought I had plenty of exposure to real estate/housing/construction and I'd be looking elsewhere for opportunities. If so, you're probably right about the "plenty of exposure" but you're wrong about the "looking elsewhere," as today I bought 125 Jan 2013 $12.50 call options on Masco (MAS) for $0.45 per contract. In plain English these LEAPS give me the right to buy 12,500 shares of MAS on or before January 19, 2013 for $12.50 a share.
So what does Masco do? Well they've got five segments which I'll list below (it's OK if you cringe a little, I did too):
My hope is the economy manages to stay out of a deflationary spiral and we see housing rebound in a year or two. If this is case, Mr. Market's manic depressive mood around Masco should change as well, and the stock could easily climb to the mid-teens. Looking at my investment checklist (http://mevsemt.blogspot.com/2010/08/investing-checklist.html) this stock meets most of the criteria - insider buying, 52-week low, guru buying, discount to Morningstar & my fair value, high degree of leverage on the options, and asymmetric payoff all fit here (althoug insider and guru buying is a bit light).
To give you an idea of the upside I'll take a haircut to Morningstar's fair value of $22 and assume the stock gets to either $15 or $17.50 at expiration. The cost of these LEAPS was $5,656 and if MAS hits $15 they'll be worth $31.3K. If MAS hits $17.50 they'll be worth $62.5K. Can you say asymmetric?!
Lastly, on a cautionary note I should stress that this is a very speculative bet. In the past some of these have really paid off (SD and NRG) and others completely flopped (EXC and so far SHLD). I have no idea how this one will turn out, but I personally feel the risk-reward is worth it. Wish me luck!
As always I'm available for questions and appreciate comments. Email mevsemt@gmail.com.
So what does Masco do? Well they've got five segments which I'll list below (it's OK if you cringe a little, I did too):
- Decorative/architectural products (including Behr paint)
- Plumbing (including Delta faucets)
- Cabinets & related products
- Installation and other services
- Specialty products
My hope is the economy manages to stay out of a deflationary spiral and we see housing rebound in a year or two. If this is case, Mr. Market's manic depressive mood around Masco should change as well, and the stock could easily climb to the mid-teens. Looking at my investment checklist (http://mevsemt.blogspot.com/2010/08/investing-checklist.html) this stock meets most of the criteria - insider buying, 52-week low, guru buying, discount to Morningstar & my fair value, high degree of leverage on the options, and asymmetric payoff all fit here (althoug insider and guru buying is a bit light).
To give you an idea of the upside I'll take a haircut to Morningstar's fair value of $22 and assume the stock gets to either $15 or $17.50 at expiration. The cost of these LEAPS was $5,656 and if MAS hits $15 they'll be worth $31.3K. If MAS hits $17.50 they'll be worth $62.5K. Can you say asymmetric?!
Lastly, on a cautionary note I should stress that this is a very speculative bet. In the past some of these have really paid off (SD and NRG) and others completely flopped (EXC and so far SHLD). I have no idea how this one will turn out, but I personally feel the risk-reward is worth it. Wish me luck!
As always I'm available for questions and appreciate comments. Email mevsemt@gmail.com.
Thursday, August 11, 2011
Out of the Frying Pan?
This week has been absolutely insane! Typically I'm not a "trader", but the volatility we've had this week has created some interesting opportunities...
Regular readers know Bank of America has been a huge thorn in my side - first I took a loss on the common stock, then I traded it in for TARP warrants only to have things go from bad to worse! But there's a silver lining; over the last three days BAC-WTA has rebounded about 50% off its lows. Now this isn't a function of a great earnings release or anything like that, rather it's simply a bi-product of the volatility that's been dominating the market.
Anyway, as a result I decided to sell my stake in BAC-WTA for two reasons. First, I'm still underwater on this position so I wanted to lock in a tax loss. Second, I wanted to use the proceeds to buy AIG TARP warrants (AIG-WT), which are still right around their all-time lows and IMO represent a better value at this time. Specifically, I sold the 4,000 shares of BAC-WTA for $3.40 (netting me $13,595) and used the proceeds to buy 2,000 shares of AIG-WT at $6.94 (costing $13,885).
For anyone interested in AIG there's a great analysis here: http://longtermvalue.wordpress.com/2011/05/13/american-international-group-aig/. Bruce Berkowitz has also commented extensively on the company, so you can check that out as well. And lastly, just because I sold BAC doesn't mean I've given up on the company (or banks in general). In fact, Citigroup is another company high on my watch list.
Questions? Comments? Email mevsemt@gmail.com
Wednesday, August 10, 2011
Cash and Cojones, Part II
Back in May I wrote a post titled "Cash and Cojones," (http://mevsemt.blogspot.com/2011/05/cash-and-cojones.html) in which I said the following:
Recently I've read a handful of articles that basically say the same thing in different ways: proceed with caution. Or, to put it more colorfully, in early 2009 you only needed two things to make a killing: cash and the cojones to commit it. Ironically, if you had those two things in 2005-2007 you probably got killed. So what does the market feel like today? Well, while we may not be quite at the excesses of 2005-07, we're definitely nowhere near the palpable fear of early 2009.
So the real question is what’s an investor to do? Obviously I have no idea what the right answer is (remember, I'm just some guy with a blog), but I’ve been focused more and more on mitigating risk and less and less on reaching for returns.
So, out of a general sense of concern and nervousness I managed to keep a large % of my portfolio in cash. In fact, at the end of Q2 my cash position was 37% (http://mevsemt.blogspot.com/2011/06/q2-2011-returns.html). However, over the recent days/weeks the fear in the market has grown steadily and, while it might not be 2009 all over again, I'm wondering if maybe now is the time to start using some of that dry powder...
With that in mind I decided to dip my toe in the water by adding to my SHLD LEAPS. Specifically, I bought Jan 2013 $95 call options (10 contracts at $3.00) for a total outlay of $3,010.76.
On a side note there are a ton of stocks I've added to my watch list, some of them are new (MS, JEF, AMD) and some are old friends (SD, USG, NRG). As always, if I buy or sell anything I'll do a quick write up that day. Good luck everyone, and for those of you worried about the market decline just remember - this too shall pass.
Questions? Comments? Email mevsemt@gmail.com.
Recently I've read a handful of articles that basically say the same thing in different ways: proceed with caution. Or, to put it more colorfully, in early 2009 you only needed two things to make a killing: cash and the cojones to commit it. Ironically, if you had those two things in 2005-2007 you probably got killed. So what does the market feel like today? Well, while we may not be quite at the excesses of 2005-07, we're definitely nowhere near the palpable fear of early 2009.
So the real question is what’s an investor to do? Obviously I have no idea what the right answer is (remember, I'm just some guy with a blog), but I’ve been focused more and more on mitigating risk and less and less on reaching for returns.
So, out of a general sense of concern and nervousness I managed to keep a large % of my portfolio in cash. In fact, at the end of Q2 my cash position was 37% (http://mevsemt.blogspot.com/2011/06/q2-2011-returns.html). However, over the recent days/weeks the fear in the market has grown steadily and, while it might not be 2009 all over again, I'm wondering if maybe now is the time to start using some of that dry powder...
With that in mind I decided to dip my toe in the water by adding to my SHLD LEAPS. Specifically, I bought Jan 2013 $95 call options (10 contracts at $3.00) for a total outlay of $3,010.76.
On a side note there are a ton of stocks I've added to my watch list, some of them are new (MS, JEF, AMD) and some are old friends (SD, USG, NRG). As always, if I buy or sell anything I'll do a quick write up that day. Good luck everyone, and for those of you worried about the market decline just remember - this too shall pass.
Questions? Comments? Email mevsemt@gmail.com.
Thursday, July 28, 2011
Trying Something Different...
Today I made an interesting trade - it's not really a new investment but rather a different flavor of an old one. The company I'm talking about is Bank of America, and what I did was buy the class "A" TARP warrants ("BAC-WTA" on yahoo finance) while at the same time selling my 2000 shares of BAC common stock. I purchased the TARP warrants for $4.52 (costing me $18,085) and sold the common for $9.76 (netting me $19,516). In other words, I simply exchanged the common for the warrants.
For those of you not familiar with TARP warrants I suggest reading the following as a quick primer: http://www.choufunds.com/pdf/SA10%20pdf.pdf (the relevant commentary is on pages 2-5). As you can see the terms for BAC-WTA are really quite interesting - the warrants don't expire until Jan. 2019, the strike price is $13.30, and if BAC starts paying a dividend the strike price is adjusted down dollar-for-dollar so long as the dividend exceeds $0.01 per quarter.
So why'd I make this exchange? Well I've been following the big banks and TARP warrants for over a year now, but only recently has the price fallen to the point where I THINK the risk/reward favors the warrants. Prior to this I preferred to be conservative and just own the regular stock. Keep in mind this is a levered investment, so if BAC does well the warrants will be a home run, but if the economy falls off a cliff and BAC flounders I'll end up with egg on my face.
Lastly, Bruce Berkowitz just gave a great interview in which he discusses BAC, which can be found here: http://www.fairholmefunds.com/pdf/amaii2011.pdf.
Questions? Comments? Email mevsemt@gmail.com
For those of you not familiar with TARP warrants I suggest reading the following as a quick primer: http://www.choufunds.com/pdf/SA10%20pdf.pdf (the relevant commentary is on pages 2-5). As you can see the terms for BAC-WTA are really quite interesting - the warrants don't expire until Jan. 2019, the strike price is $13.30, and if BAC starts paying a dividend the strike price is adjusted down dollar-for-dollar so long as the dividend exceeds $0.01 per quarter.
So why'd I make this exchange? Well I've been following the big banks and TARP warrants for over a year now, but only recently has the price fallen to the point where I THINK the risk/reward favors the warrants. Prior to this I preferred to be conservative and just own the regular stock. Keep in mind this is a levered investment, so if BAC does well the warrants will be a home run, but if the economy falls off a cliff and BAC flounders I'll end up with egg on my face.
Lastly, Bruce Berkowitz just gave a great interview in which he discusses BAC, which can be found here: http://www.fairholmefunds.com/pdf/amaii2011.pdf.
Questions? Comments? Email mevsemt@gmail.com
Thursday, July 7, 2011
Adding to Bank of America...
Today I bought an additional 600 shares of BAC at $10.93, bringing my total share count to 2,000 and making it my second largest position after LUK (as of today BAC accounts for 12-13% of my portfolio). Obviously I think BAC is a good deal at these prices, but this transaction also has the added benefit of reducing % of my portfolio allocated to cash, which had gotten a little too high after my recent deposits. Lastly, Fortune published a surprisingly good article on the CEO of BAC, Brian Moynihan (http://finance.fortune.cnn.com/2011/07/07/can-brian-moynihan-fix-americas-biggest-bank/?iid=HP_LN). It's well worth reading if you're a current BAC holder or are thinking about buying the stock.
Questions? Comments? Email mevsemt@gmail.com
Questions? Comments? Email mevsemt@gmail.com
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