It's so hard to say good-bye...

Today I sold my position in AIG TARP warrants for proceeds of $37,944 (3,000 warrants at $12.65).  Thanks to the Herculean efforts of CEO Benmosche and Chairman Miller, this investment has turned out extremely well for me.  And because of my confidence in these executives, and the solid franchise of AIG's core operating businesses, it's with a heavy heart that I decided to sell.  Nonetheless, anytime a stock is bumping up against its 52-week high I start to get nervous.  Besides, with the overall market close to it's 52-week high, I thought now may be a good time to raise some cash for the next rainy day.

For those of you keeping track, I first purchased 2,000 warrants in August 2011 at $6.94, for an initial outlay of $13,885.  In November 2011, I added 1,000 more at $5.37 for $5,375.  All-in-all, my total cost basis was $19,260, which means I made a profit of $18,684 on this position... not too shabby!

Questions?  Comments?  Email mevsemt@gmail.com.

Reshuffling the Deck

Generally speaking, some of my best stock picks have happened when the company is under duress.  Assuming the company is able to survive/turnaround, you've made several times your investment simply because so much of the perceived risk has disappeared.  For example, I bought Fairfax back when it was at $100 and sold several years later just shy of $300 (pre-blog).  I bought USG at the height of the financial crisis, and here's how it turned out: http://mevsemt.blogspot.com/2010/04/transaction-alert-sold-usg.html.

In fact, if you look at some of the best investments made by the great investors, you'll see they've done the same thing (Buffett - Geico & American Express, Berkowitz - Wells Fargo).  Of course there's a risk to this approach - maybe the market is right, and there's always a chance the company could indeed fail!  In fact, I bought AIG just as the financial crisis was hitting the fan, and lost over 50% before selling.

With this in mind, on Friday I decided to add to two of my "stressed" positions, and sell one of my holdings where I may have overestimated the upside.  Specifically, I bought an additional 500 shares of JEF at $9.92 and 1000 AIG warrants at $5.37.  The stock I sold was MIL (formally Terra Nova) at $6.80 (2268 shares).

Questions?  Comments?  Email mevsemt@gmail.com

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