Week 39: Slipping
Portfolio Performance
Portfolio Composition:
Trades:
The annoying theme that has punctuated my performance over the past few weeks has been the out-performance by my regional bank and mortgage financial service companies and their eclipse thereof by the under-performance of the oil and gold stocks that I own.
Some of the things I am doing are working. Some of them are not. Its time to go back to the simple axiom that I first heard from Dennis Gartman: Do more of what works and less of what doesn’t.
That is exactly what I have been trying to do over the past month. I have slowly (and probably less then efficiently) been reducing my gold and oil positions. With each subtraction I add to my banks, my mortgage originators and servicers. I’ve also been looking to other places to invest.
No question I would be better off (financially) today if I had dumped the majority of my oil and gold stocks a month ago and focused on my current convictions in banking and mortgage servicing. Unfortunately,my thinking takes more of a plodding pace, and I rarely am so quick to recognize the truth. It took me a month to begin to recognize the impact of the LTRO. It took me about the same amount of time to recognize that I should be out of all the golds and oils but the one’s I truly have conviction in.
This week I sold out of Coastal Energy. With the proceeds I added to Newcastle Financial, PHH Corporation and Nationstar Financial. Earlier in the week I added to a couple of my bank holdings, Rurban Financial and Bank of Commerce Holdings, while subtracting a portion of Esperenza Resources.
I also returned to Canaco Resources this week. I wish that I had done with my other gold stocks what I had the sense to do with Canaco a month ago.
As for the week that comes, I don’t see many more changes on the horizon. I am comfortable with most of the stocks I own. I have become heavily weighted to US Financials and to Mortgage originators and servicing. Now it is time to wait and see if the scenario plays out in the way I expect it to.
Reminiscences of a Stockblogger 
Thoughts on selling Fortress vs. buying Nationstar? I’m looking at both.
I’m still trying to wrap my head around Fortress. I believe Nationstar is owned by FIG’s PE Fund III and Fund IV. FIG will get some of the profits as the shares are sold, according to 10-K this varies between 10% and 25% for PE depending on fund terms. But what else does FIG own? All kinds of funds and who knows what is in them. Its a black box. The thesis for me is that FIG appears to understand the mortgage servicing opportunity, so you buy on the expectation they will capitalize on that.
NSM is interesting. I bought b/c they are big into the servicing game, they are a recent IPO and so as of yet uncovered by analysts, they are growing at an outstanding rate, and they have a balance sheet and income statement with VIE’s that obscure the real value. I plan to write it up shortly.