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January 2011

Recs

3

Berkshire and Dividends - or not

January 24, 2011 – Comments (1) | RELATED TICKERS: BRK-A

Barrons recently argued that Berkshire Hathaway should consider paying a dividend. Shares are up a bit over 3% as I write this. I hate to disappoint people, but I think that Berkshire will likely not pay a dividend for some time.  [more]

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1

Cloud Peak Energy: An Interesting Spinoff

January 21, 2011 – Comments (1) | RELATED TICKERS: CLD

Cloud Peak Energy owns coal mines in the Powder River Basin in Wyoming. Cloud Peak was partly owned by Rio Tinto, and it was basically lost among Rio's huge asset base. Its management made some questionable decisions about production. However, now Cloud Peak is becoming independent. Its management's incentives will be far better aligned with public shareholders. In addition, Cloud Peak's four main competitors have been competing on a far more rational basis.  [more]

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1

Realty Income is likely to raise its dividend in 2011

January 21, 2011 – Comments (0) | RELATED TICKERS: O

Previously, I cited some Morningstar research indicating that, contrary to Bill Ackman's poorly researched short thesis, Realty Income was not in trouble and was likely to be able to maintain its dividend in 2010. The company's payout ratio was over 90% of its funds from operations, and it was close to breaching a covenant on its revolving credit line. However, if it did so, it would very likely be able to obtain a waiver from its creditors. The company was in no danger.  [more]

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2

Actually, we still don't know whether or not Mannkind will live or die

January 20, 2011 – Comments (2) | RELATED TICKERS: MNKD

Earlier, I said that Mannkind was most likely going to either survive as a firm or perish by February 2011, due to an impending FDA decision on Afrezza, its inhaled insulin product. I bought a strangle on the stock, which is a long put and a long call. That way, I would profit if Mannkind either got its product approved or denied.  [more]

Recs

3

Comments on St. Joe

January 12, 2011 – Comments (0) | RELATED TICKERS: JOE

Yesterday, St. Joe's shares took a 5% dive on news that the SEC has initiated an informal inquiry into their accounting practices. This is likely fallout from David Einhorn's famous short thesis, which I've criticized as too focused on the short term. As to St. Joe's accounting, it's ultimately up to the company and its auditors as to whether they've accounted accurately for the value of their land holdings. Einhorn, though, egregiously misstated the potential value of its development properties. The SEC should certainly make inquiries to resolve controversies like this, because it keeps companies honest. However, St. Joe has no history of questionable accounting.  [more]

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2

Further action on St. Joe

January 07, 2011 – Comments (3) | RELATED TICKERS: JOE

Last year, I bought a ~2.5% position (small for my portfolio) in St Joe at around $24. I sold $22.50 put options on the stock, expiring in 14 days.  [more]

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1

Investment Review: Industrial Stocks

January 03, 2011 – Comments (1) | RELATED TICKERS: CMP , FTEK , JOE

Considering only the stocks that Morningstar formally classifies as industrial materials stocks, I am underweight in industrials in real life. I have a number of industrials picked in CAPS, but I obviously try to weight my real life portfolio towards my best ideas.  [more]

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1

Investment review: non-bank financial stocks

January 03, 2011 – Comments (1) | RELATED TICKERS: BRK-A , PAYX , O

My portfolio has long been heavy on financial stocks. I was heavy on banking stocks going into the crash, which caused me much pain (thanks for nothing to Bank of America, Lloyds and Allied Irish). However, I've also been relatively heavy in non-bank financial stocks.  [more]

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6

Investment Review: Healthcare stocks

January 03, 2011 – Comments (1) | RELATED TICKERS: RHHBY , ZMH , MDT

In 2010, healthcare stocks were beaten down by fears over health reform. I believe these fears are generally overblown. Increased volume should offset margin declines in most healthcare stocks. I would stay well away from publicly traded hospital and nursing home stocks, because margins there are very low.   [more]

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4

Bank of America - common stock vs TARP warrants

January 02, 2011 – Comments (0) | RELATED TICKERS: BAC

The U.S. Treasury received warrants in many big banks in exchange for bailing them out. A warrant is a long-dated call option that gives the holder the right to purchase a stock at a certain price. With call options, I generally prefer to get options as long dated as possible to give an idea time to work out. Most of the options listed on the exchanges go out two to three years at maximum, and on smaller stocks, one might only be able to get options dated 6 months to one year out.  [more]

Recs

6

Investment review: the banks

January 01, 2011 – Comments (5) | RELATED TICKERS: USB , WFC , BAC

The big US banks were generally in slow recovery mode in 2010. The foreclosure mess cast a pall of uncertainty over the entire sector - a worst case scenario of widespread freezes on foreclosures was unlikely, but it would have severely affected the banks. However, that now seems unlikely.  [more]

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11

Mannkind will either live or die by February 2011

January 01, 2011 – Comments (0) | RELATED TICKERS: MNKD

Mannkind expects to hear from the Food and Drug Administration in early February whether or not it will receive approval for its inhaled insulin, Afreeza. If insulin could be made available in an inhaled form with the same safety profile as injected insulin, it would be a blockbuster. It's really no fun to jab yourself with a needle twice a day, and medication compliance among diabetics is not what it should be as a result. An inhaled insulin could change that. However, a competitor inhaled insulin, Exubera, failed, and all other companies have pulled their inhaled insulins from development. There is a possible concern that inhaled insulin could potentiate the risk of lung cancer among smokers.  [more]

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