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Week 20: Back into Gramercy, Adding to OceanaGold

This week I finally got my order filled for Gramercy Capital at $2.75.   Plan Maestro had another excellent write-up on Gramercy last month.  CDO-2005 did relapse and fail its over-collateralization test.  This may have something do to with the weakness in the stock.  Still, the stock has a net asset value somewhere north of $5.  And Bloomberg has had two articles in the past two months commenting on the likely sale of the company to private equity.  I feel comfortable holding shares bought at this level and waiting for such a buyout.

While on the subject of US real estate, I began to review some of the regional and community banks this week.  Community Bankers Trust, which released Q3 results last week, appears to be on the upswing.  The stock remains extremely cheap based on tangible book value or earnings potential.  I do not own any regional banks shares at the moment but it may be something worth looking at in the next (inevitable) downdraft.

I added to my position in OceanaGold on Friday.  I have had a standing bid in for at $2.21, and it was filled.  This stock seems range bound between about $2.20 and $2.70.  I’m not sure why it cannot break higher.  I posted Sunday about the cash generation capabilities of Aurizon Mines.  I could have just as easily written about OceanaGold.  The only difference between Aurizon and OceanaGold is that Aurizon can continue to generate cash at lower gold prices.  In addition, OceanaGold’s costs get misinterpreted to be higher than they actually are because

  1. so much of them are being expensed right now, as opposed to capitalized.
  2. They are in NZD, which has been perhaps the strongest currency in the world this year

Absent these two factors, the first of which is really just smoke and mirrors, and the stock would be trading substantially higher.  As it is I am picking up a company with growing production, likely lower costs (the NZD is down from 83 to 78 so far this quarter), and doing it at the lower end of the trading range.

The last trade I made did not show up in the practice account but will next week.  On Friday I sold 1/3 of my position in Arcan and planto use the proceeds to buy Midway.   I have nothing negative to say about Arcan.  They appear on-track.  Nevertheless, Midway is a cheaper stock right now, especially after the recent steep drop.  Midway also appears to be a good takeover candidate to me, so I don’t mind being diversified in case of such an event.

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