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Melaschasm (65.15)

Has GNI bottomed, or does it have further to fall?

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January 14, 2011 – Comments (1) | RELATED TICKERS: GNI

A week ago I read an interesting article about GNI, which led to my short position on GNI.  http://www.fool.com/investing/general/2011/01/05/a-massive-dividend-youd-be-crazy-to-buy.aspx?source=itxsitmot0000001&lidx=4

Now that GNI has plummeted, has GNI reached a fair price, or does it have even further to fall?

 

From a real money investment viewpoint, I think this is a good place for some profit taking, while perhaps leaving a little money invested in puts to take advantage of further weakness.

From a CAPS standpoint, I am leaning towards keeping this red thumb open.  If this is a fair market price, I can continue to profit via future S&P gains.  This position also provides a hedge against my generally bullish outlook on commodity prices.  Should there be a significant correction/crash in commodity prices, this stock should fall, offsetting some of my losses on long positions.

What do you think?

1 Comments – Post Your Own

#1) On January 14, 2011 at 12:46 PM, TMFBabo (100.00) wrote:

I think "bottom" will be when the present value of future dividends is equal to the current share price.  I've seen several different calculations for the present value and they're all below today's share price, so I think there are more points to be had.  Still, who knows how long that'll take?

I don't think it's unwise to close out a pick with 30+ points, but I'm going to let this one ride out.  We'd be wise to remember that as the dividends are paid out, the cost basis will be adjusted accordingly. 

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