I did make some changes to my portfolio the past two days. I thought I would walk my readers through my rationale. Of course, I am not giving investment advice... but rather making a diary entry. I encourage everyone to do their own due diligence.
I sold the rest of my STD (hate that ticker) today except for a small placeholder. I got $8.20 and I did take a loss. But the European crisis is wearing on my patience and the stock seems to move sharply up and down based on le news du jour. Hopefully my sale price was an "up". If it comes back to the low 7s, I might buy back in. They did commit to retaining the dividend (about a 10% yield) for 2012.
I have mentioned several times that I own GNW. I bought them (around $6.70) because Seth Klarman has made them a large position for the Baupost Fund. Today they closed at $8.04, so I am already sitting on a nice gain in what is frankly a relatively large position. They announced their earnings after the bell and I did something I have only done two or three times before. I bought shares after the close! I increased my position by 50% at $8.50 a share. Here are my thoughts:
- The book value is now $33 a share. Clearly the market does not believe the book value, but that is a major haircut.
- The primary concern (I believe) is Genworth's mortgage unit... so this is really a backdoor play on a housing recovery.
- This quarter, the losses from that unit diminished to just -16 million. What is interesting is that the US part of that unit is getting smaller and smaller, and they are growing their Canadian and Australian holdings, which are quite profitable. I believe they are just a quarter from starting to make money in Mortgage Insurance again. And I also believe that will be the signal to the market that the water is fine.
- There is always the chance that GNW splits into two or three parts as the Life Insurance part by itself is worth well north of the $8 stock price.
To add a little extra color, it looks to me like for the back 6 months of 2011 only 20% of mortgage premiums were US, the rest were mostly Canada, Australia and New Zealand.
I found this pdf showing the differentiation of mortgage insurance for Canada and Australia vs the US - it is quite interesting (Genworth Australia - Mortgage Insurance). I encourage you to read if you're interested in GNW.
One final note, while GNW does not currently pay a dividend (and thus is not a member of my dividend portfolio), I do believe once they get the mortgage crisis behind them, they will begin again. They used to pay 10 cents a quarter, which would be 4% on a $10 stock.
Research in Motion
This is the stock everyone loves to hate. But if you put your emotions aside for a moment, it is actually a compelling story at $17. They are trading at 84% of book value. While they are certainly losing market share, I believe that their obituary is premature. I mean USMO (pagers) and Earthlink (Dial-up) are still making decent profits. What made me really think was looking at my favorite gurus. Prem Watsa, who is one of the smartest investors on the planet, doubled his already sizable stake on January 27th (Prem Watsa's Fairfax ups RIM stake). They are certainly an MFI-type stock, with 1.3b of excess cash versus their $9b market cap. They have an earnings yield of 38% and ROIC of 57%. So as of today, I am an owner of an actual blackberry and the stock.
I bought UIS for about $18 post their earnings the other day as I felt they were punished unfairly. This is a stock that has been on the MFI screens regularly over the past two years. Theyour a poor man's IBM in many ways. They are creating strong cash flow and are paying off their expensive debt (they are targeting some with a 15% cost!). After that gets paid off, that is more cash dropping to bottom line for shareholders. Woo-hoo!