Wednesday, February 11, 2015

Maybe I Should Find More Companies Losng $760 Million

In a bizarre turn, GNW posted a loss of $760 million last night and in pre market, Starbucks trading hour is seeing the stock edge up 12%. When they announced last night I was actually quite upset as I read their press release (initially). They seemed to be soft pedaling the numbers, saying a bunch of their book was ok (yet they still has to take a huge hit) and then stating the hit on an after tax basis (to make it seem smaller). I am scratching my head on how you do it after tax, when they will not make any income this year. I guess it will be a tax carry forward.

The stock traded down immediately from $7.80 to $6.70. Driving home, I was trying to decide what I should do. Should I sell?  Should I buy?  The key fact I looked up right before I drove home was their diluted book value per share. $21.09, down from $23.95 last year. So despite the stock dropping 49% in the past 12 months, the book value has dropped a bit more than 10%.  Perhaps that is an opportunity?

So my thought driving home was to double my shares if it sold off sharply this morning. I thought there was a fair chance of a downgrade and a fair chance that GNW puts itself up for sale. But will a book value north of $20, it doesn't seem unreasonable to think that a final sale price would be above $10. If you could buy shares at $7, that is a 42% gain.  However, I see the stock is up this morning, so either my analysis was done by others as well, or else there is something else I don't understand.

Then in other good news, it appears that Citigroup has upgraded NUS to a buy. This has been a great buy for me, already up 26% and will likely pop a few percentage points today. NUS has actually climbed my list to be my 4th best stock (in terms of $ gain) ever (recall I owned it for a double in Feb 2013 MFI tranche). Of course it should be noted that GTAT and GNW also at one point were in my top four, so it can be fleeting.

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