Tuesday, January 07, 2014

Great Northern Iron Ore Sinks Heavily

As has been pointed out, MFI really has no way to tell if something is really going to change with a security.  GNI is a great example. It is a member of my MFI index, but as has been pointed out on this blog, it a trust that has been scheduled to be dissolved in 2015.  Amazingly, (certainly an argument against efficient markets) it has been trading well above the Net present value of the final five or six dividends, which is actually a pretty simple calculation.

Yesterday, it seems that the market finally woke up to the fact. GNI dropped from $66 to $36 in a single day.  And it isn't even worth $36. If I had been more alert/smarter, I would have found some way to profit from this inevitable drop. But I have never shorted an individual stock.

I am off to a mediocre start for 2014. I am now down 53 basis points. The Russell 3000 is off 1.17%, so I suppose there is solace in that. I actually am kind of rooting for a correction (though admittedly they are never fun) as I am sitting on a relatively large cash position.  I keep trolling for ideas (recall I have not bought anything since 12/11) but have not seen anything obvious.  I will need to pick 5 ideas by February 1st when my MFI tranche comes of age.  Still kicking around a lot of names: CSCO,  ATVI! RPXC, STRZ ( amongst stocks I currently own) and MO, RAI, SNDK and COH as well. I think I will probably focus on larger cap stocks (one billion or greater).  It seems to me the recent rally has been led by smaller companies and they seem to be getting a bit extended.

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