Dodging Bullets

They say it is ok to panic, so long as you panic before everyone else.  I guess I ended up doing that with GTAT.  I mentioned over the weekend that I had sold my GTAT last week and that I was having some seller's remorse as the stock had gone up 8% post-sale.  Well, today it has given that all up and more as the stock is off 19% as they announced a 25% staff reduction plan and that 2013 was going to be "challenging" (GT Advanced Plunges on Job Cuts, Sees ‘Challenging’ 2013).

In fact, the whole greater MFI seems to be struggling today. I saw where along with GTAT, LPS and WU were in the loss leader category.  I want to be a believer, but I do wonder if markets price these out-of-favor stocks better now and MFI no longer works effectively.

Here are some names and how they have done in 2012:

APOL: -63%
COCO: -57%
DELL: -37%
GTAT: -38%
ESI: -62%
MANT: -27%
MNTA: -27%
GNI: -31%

Overall, my MFI index is up 6.6%... not that great a result, versus 12% for the Russell 3000.

GNW Posts Earnings

GNW is one of my few stocks that falls neither in the dividend portfolio nor my MFI portfolio. I suppose someday it may re-enter the world of dividend stocks, but as they are a single step re,over from Junk, that may be a couple more years. That being said, they are an intriguing play on the mortgage market.  Fr those that do not know Genworth, they were a life insurance arm of General Electric that was spun off in 2005.  They have gotten hit by a double whammy.  First life insurers are generally struggling as they rely as much as any industry on bond investments.  They take in policy holder funds, and need to get certain returns (that they have locked in way in advance) on those funds to make money. Obviously, with all fixed income yields suppressed by our friendly fed, they are struggling. Second, they are one of the largest mortgage insurers in the world, with significant exposure to the Australian, Canadian and US markets. Obviously, especially in the US, insuring that people will pay their mortgages has been a loss leader.

However, in my opinion, the bad news is priced in and the investor that can look forward a couple of years may be richly rewarded. Their book value is about $34 per share, yet you can buy them for under $6. Obviously, the market believes the book value is overstated... Ad it may be correct.  But if house prices are finally starting to hi bottom and go up, that should alleviate the biggest overhang on the stock.  The second biggest is they need to improve their ratings with the rating agencies.  A spin-off (they are looking explicitly at spinning off Australian company), would really help.

Stay tuned...though they look to be up 4% Pre market based on last night's earnings.

Another Jelly Donut Critic

As we wait for the markets to re-open post Sandy (do we call her a superstorm or a hurricane?), I wanted to follow-up on a posting I made a month or two ago with David Einhorn comparing quantitative easing to jelly donuts.

Well, a couple of other names are also not fans, value investors Warren Buffett and Seth Klarman.  WEB was on CNBC last week and stated that he would certainly listen to Ben Bernanke about the rationale for qe3, but stated that is not likely an approach he would have used.  His sound bite was something like "the fed can always use it's balance sheet to buy as many of whatever securities it wants to buy, but they will find it more difficult to sell those securities down the road." That is really the crux, when the fed tries to sell these MBS or treasury notes that pay 2 or 3% interest for the next thirty years and real rates have finally re nflated to five or six percent, there will not be many buyers, except at a steep discount. Not sure who is benefitting from this approach, but I am sure it isn't helping savers like me.

Klarman was also spot on.  I have included his letter to shareholders here: ()sethklarmanblog.blogspot.com/).

Newest Tracking Portfolio

Here is the monthly tracking portfolio starting October 26th, 2012

Stock	Initial Price	Mkt Cap
GNI	74.75	112
DMRC	19.52	132
BODY	9.98	162
INTX	9.43	169
POZN	6.31	190
AFAM	20.82	196
PETS	10.75	215
AGX	17.30	238
USMO	11.16	247
NATR	17.01	266
TZOO	17.96	285
TNAV	7.15	294
CPLA	31.74	406
EGY	7.95	454
ESI	21.49	501
VG	2.24	507
RPXC	9.78	509
GTAT	5.12	608
USNA	44.25	626
MNTA	13.14	679
STRA	57.76	686
KLIC	9.89	733
MANT	22.33	825
NSU	4.72	942
EXPR	11.15	967
VCI	26.30	1,024
CACI	49.45	1,218
SAVE	17.03	1,235
JCOM	29.47	1,324
QCOR	26.17	1,530
PDLI	8.07	1,531
BAH	12.55	1,674
APOL	19.72	2,213
LPS	27.33	2,312
NUS	41.94	2,525
GME	23.00	2,864
WCRX	11.76	2,946
DLB	30.74	3,235
SAI	10.80	3,694
TW	53.15	3,811
MRVL	7.76	4,326
HRB	17.75	4,812
HFC	38.89	8,141
CA	22.73	10,410
STX	27.91	10,836
CF	204.82	12,831
DELL	9.24	15,994
RTN	55.71	18,384
CSCO	17.29	91,602
MSFT	28.21	237,585

Then here are the dividend stocks (I have added CSCO, DELL and QCOR as I know they are paying higher dividends and Yahoo Finance is not the most reliable site):

Stock	Initial Price	Mkt Cap	Total Dividend	Yield
AGX	17.30	238	0.60	3.5%
BAH	12.55	1,674	8.18	65.2%
CA	22.73	10,410	0.80	3.5%
CSCO	17.29	91,602	0.56	3.2%
DELL	9.24	15,994	0.32	3.5%
GME	23.00	2,864	0.60	2.6%
GNI	74.75	112	14.50	19.4%
HFC	38.89	8,141	2.50	6.4%
HRB	17.75	4,812	0.80	4.5%
INTX	9.43	169	0.80	8.5%
JCOM	29.47	1,324	0.88	3.0%
MANT	22.33	825	1.05	4.7%
MRVL	7.76	4,326	0.24	3.1%
MSFT	28.21	237,585	0.80	2.8%
PDLI	8.07	1,531	0.60	7.4%
PETS	10.75	215	0.58	5.3%
QCOR	26.17	1,530	0.80	3.1%
RTN	55.71	18,384	1.93	3.5%
SAI	10.80	3,694	0.36	3.3%
STRA	57.76	686	4.00	6.9%
STX	27.91	10,836	1.00	3.6%
USMO	11.16	247	0.88	7.8%
WCRX	11.76	2,946	4.00	34.0%

Plenty to pick from.  It seems like more and more companies are offering dividends.

Then here are the new companies in the past 12 tracking portfolios to the list:

Stock	Initial Price	Mkt Cap
MRVL	7.76	4,326
HFC	38.89	8,141
CA	22.73	10,410
BAH	12.55	1,674

Ironically, they are all also dividend stocks!  CA is one I will likely buy for my November Tranche.  Ok, enough writing.  I need to go bring in the patio furniture for this weird Hurricanne Sandy.