checklist34 (99.77)

recently took positions in CBI, BAC, FIG, added to TCK

June 01, 2009 – Comments (7)

I've been deploying my cash hoard in recent weeks as the S&P toyed around with the 875 mark but never broke through. 

Before I finish this post I should add that when I say "big" positions I mean perhaps 2% of my portfolio.  While I am very stock focused with essentially no diversification into bonds or bank CDs or anything, my stock portfolio is not heavily weighted in any one company.

I added alot to my position in TCK (already one of my largest holdings) in the low double digits, today it hit $17.  My logic here is that TCK doesn't do business in $USD so an event where the value of the USD falls dramatically (no matter what you read here on CAPs this is not certain) would not hurt them but rather should benefit the stock.  Also they are at the top of the material food chain, being a miner, and should benefit from inflation and a gradual rise in commodity prices.  Lastly they have refinanced their Fording purchase satisfactorily and have the potential to be a cash flow machine.

I took a good position in CBI in the 10-11 buck range as Stifel upgraded it to a buy (I like Stifel's research reports better than anybody elses), their backlog and other metrics were favorable in a recent article, they are still well down from their highs, and have a market cap in about the size range that's historically done very well coming out of big bear markets.  And a return to interest in oil should benefit CBI.

I took a position in FIG (actually added to a small one I had earlier) after the enormous insider buys recently, and after listening to their conference call and hearing their attitudes about opportunities in investment now (they had the right "buy when its cheap" attitude).

And I took a sizeable position in BAC after sitting down and considering these:   1)  the companies earnings potential is easily 20B+/year, quite possibly much higher if some of the things favorable to banks materialize in coming quarters and years such as high spreads and a sort of re-pricing of credit favorable to the creditors like that predicted by the C CFO in their most recent conference call.  Overall BAC could earn 20B (that is hardly unreasonable), Countrywide 1 or 2 (also not unreasoanble), and Merryl could earn sevearl billion as well.  If they can successfully integrate and realize cost savings, overall earnings of 30B aren't impossible.  And with a p/e of 10, not exactly radically high, a best case for earnings could leave the stock a triple from here and a more moderate case could leave it a double.  2)  BAC's capital raising moves were impressive and swift and demonstrated considerable support from institutional buyers  3)  BACs stock was oversold via the oscillator when I took the position and had been basing at the $10 range throughout the capital raising process.  $)  the potential future dividends are good.   In essence, I think BAC from $10-11 is a good long term hold.  I had a bunch of BAC from very low prices but I sold it in th e$9 range in April.  Its situation has improved since then and I got back in at slightly higher prices.

And I bought some C preferreds subject to conversion and then hedged them by selling an equivalent number of naked in the money calls for C.  Thats kind of a speculative play on the conversion.  Worst case I own some C preferreds or some C common that goes in the toilet as people dump it onto the market after conversion.  Fascinatingly, 100% of the naked calls I sold on C were executed within days of selling them despite being nowhere near their execution date, and despite the fact that they were executed at a sizeable loss to whoever pulled the trigger.  I got I think $2something for each call and they were executed at about $1.60 net value.  There has to be some significance to that that I'm not grasping, conspiracy theorists take note.

The Gov't is also an owner of C, and I don't see C common going to zero, and in the fullness of time I think after all the epic dilution it could return to $5-7 bucks.  Between the profit on the calls and the deep discount offered by the conversion my cost average will be less than $2.50. 

Beyond that I have begun looking for small cap oil, gas, and metal stocks that should move nicely with changes to the price of the underlying commodity.  I've accumulated some AA as well.

And thats about what I've been up to.