by Travis Johnson, Stock Gumshoe | February 10, 2013 10:10 pm
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Source URL: https://www.stockgumshoe.com/2013/02/back-to-1-2x-book-good-for-greenlight-and-some-other-updates-on-new-stocks-and-favorites/
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I nibbled on some shares of GLRE in Dec when it took a dip. I also nibbled on some shares of AAPL when it went below $450. I think GPD would be a good one to add a starting position to now. I initially had it when it made its big run and the stopped about at $1.10. I think if you were willing to stomach some voliatility and hang onto it for a few years it would be a good one. Maybe even buy more if it drops further. It seems to me MKL shot right back up after the drop, I was hoping to catch it but I missed it. I think I will wait for another drop before nibbling on shares. I had to laugh about Einhorn’s crying about AAPL, maybe it will do some good but who know.
Travis, I always look forward to your comments and while I have nothing against MKL I wonder why you do not prefer FFH.TO, Fairfax Finaancial which yields 2.7%, is currently at $362, and is selling for just 86% of its 52 week high while MKL is at 98.9% of its 52 wk high. Prem Watsa runs Fairfax which started out as Markel Financial Holdings, a Canadian subsidiary of Markel.
Regarding GPD.TO on reading your previous note I picked up some, thanks. I am planning on buying more this week.
best wishes,
/* Phil */
Nothing against Fairfax specifically, I like Watsa but last time I looked at FFH I wasn’t comfortable with the valuation. I’ll probably look again before too long.
Thanks, Travis. Btw I was not implying that I am a buyer of FFH as I tend to emphasize stocks in other categories, I was inquiring as to your methodology. Bought some more GPD earlier today. I appreciate your bringing it to our notice.
Sorry, but pet peeve of mine. Why do shareholders think “shareholders” rights plans are good for them.? The Gumshoe notes: “(posion pill) is intended to make sure it’s not easy for someone to take control without the board’s approval.” The board is management not the owners, their interests may very well differ from the owners (shareholders). Owners should decide ownership questions, certainly the board should express their view on any offer but the final decision should rest with shareholders. The buyout offer rejected by Nova Gold years ago is the classic example of shareholders passively accepting a board’s biased and bad decision. Also by making a buyout more difficult a posion pill lessens the number of suitors and hence you actually may receive a lower price. Of course, posion pills are advantegous for management (especially lousy ones) since it helps them protect their jobs.
I agree in principle, though I think an instant takeover in the next month or few when the spinoff happens would likely undervalue the warrant portfolio. This is an odd case, I think, we’ll have to see what kind of “shareholder rights” plan they try to implement. I don’t know if there’s someone specific building a position that has management worried, but it should be an interesting show to watch.
Does promise to be interesting, more so with the retaining of Raymond James which one hopes will address the diversification worry in some manner. Rob McEwen made an interesting point about royalties lately.
“I will say that one trend that disturbs me is the growth of selling metal streams and royalties,” McEwen said. “It reminds me a lot of the hedging that was done 10 and 20 years ago. It’s an easy path, a relatively easy path to sell a metals stream. But unfortunately the companies that do are giving away a large part of their profit margin. They may have financed their mine, he said, but they have made their company less attractive in the market because you no longer get any margin expansion with the price increase.
http://www.mineweb.com/mineweb/content/en/mineweb-junior-mining?oid=176962&sn=Detail
I still think you are wrong about the rights plan. Shareholders (the owners) should determine what is a fair price for their property. Advice from management should be considered. I use the example of Barrick’s $7.1 billion bid for NovaGold in 2006 as example. The Nova board rejected the offer, I sold my shares in the open market exercising my responsbility as shareholder. Those who supported the board’s right to make that call suffered the consequences. Nova market cap today is roughly $1.3 billion.
lysander72 couldn’t be more correct. The Board and management should almost never be considered on the side of shareholders these days as management is almost, not always, but almost always acting in its own self-interest and shareholder rights plans to thwart takeover attempts are prime examples of that. There are exceptions to every rule of course but passive shareholders rarely find themselves on the same side of a transaction as management with its jobs, options and warrants to consider.
Thanks for the update on ROIC. I’ve been holding onto their warrants and was wondering what caused the sudden drop. Your explanation about the dilution makes sense. Hopefully their upcoming earnings will provide a solid boost to their stock price.
Looks like GLRE underwriting didn’t bounce back instantly — they did decide to book some reserves for Sandy and underwriting for the quarter just announced today (Feb. 19), and the expected investment losses did indeed hit the book value. Haven’t listened to the call yet for the details, but book value per share has dropped to about $22 so we could see a lower price when trading resumes tomorrow — I have a limit buy order still in place that’s close to that new lower book value, so it’s possible I’ll be adding to my holdings if the shares drop by more than 6-8% on the news.
The weak investment quarter was pretty well known by investors already and they didn’t sell the shares, so the stock’s response to this quarter is likely to come from their explanation of the continuing turnaround in underwriting and anything they say about 2013 and their prospects for this year. The conference call isn’t until 9am tomorrow, so it might be a bumpy morning for the shares as whatever GLRE management says is digested just as the market opens.
Glre up on a down day with heavy volume after a mixed earnings report seems to indicate the market thinks glre can turn the ship around. If next quarter the investment portfolio can make money gmcr and appl are big factors, and underwriting improves we could be off to the races.