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Week 57: Belatedly

Portfolio Performance

Portfolio Composition

Click here for the last two weeks of trades.

Portfolio Summary

I’m a bit late on this update because I was away for most of last weekend.  I wrote the update below over the weekend and to some extent, my concern about under-performance has been mitigated by the out-performance over the last couple of days.  So with that said…

I hate it when the market goes up and my stocks don’t follow.

Such was the case over the last two weeks.  The market soared, but many of the stocks I own did not. There was the case of company specific news (MGIC) and the collateral damage to other companies in the same industry (Radian and MBIA).  There was rumor and innuendo and still no settlement with Bank of America (MBIA).  There was the continued malaise of a sector in a prolonged bear market correction (gold and its producers, OceanaGold, Atna Resources).  And there were the stocks that I have maybe gotten into a bit too early (Arcan Resources, JC Penney).

Its unfortunate.  But I’m not ready to throw in the towel on any of these stocks just yet.

As I have already written about, in the last couple of days I added to my positions in Radian Group and MGIC.  I’m not sure whether this is going to prove to be a mistake or not.  MGIC has a market capitalization of $150 million.  Radian’s market capitalization is about $300 million.  Both of these companies insure billions of dollars in insurance, earn premiums on insurance of more than $600 million per year and are talking losses on the insurance written on their old book of anywhere between $200 million to $550 million per quarter.

My point here is not to give an analysis as much as it is to point to the magnitude of numbers involved relative to the size of the companies.  The reason these stocks have fluctuated to such extremes in the past and present is because small changes in assumptions about future losses have an outsized impact on the share price. MGIC came out and said this week that the embedded run-off value of their existing insurance book is $1.9 billion.  Meanwhile, many analysts are writing writing the company off as bankrupt.  When the range of scenarios of future value is between a 10-bagger and a complete loss, you end up with a wildly volatile stock.

As for the oil stocks…

I’m kicking myself for selling out of Mart a couple of weeks ago.  I got too cute.  I thought that with the news out and the move up I would be able to get back in around the low $1.30s.  It even reached that level briefly, but I wasn’t quick enough to the trigger and now the stock is flying towards $1.70 and potentially $2.  This is simply a case of missed opportunity.  Take the hit (or lack of gain in this case) and move on.

Arcan hasn’t seen the lift I have been expecting.  There have been a lot of comments and rumors about the company over on the Stockhouse board.  I’m not going to go into the details here, you can read it for yourself, but if its true (and who knows if it is), then there are potentially some issues that the company has to work through.  Nevertheless, at $1.40 per share I am not very afraid of holding my shares.

The Canadian Dollar is killing me

Another lead weight in my portfolio over the last couple of weeks has been the Loonie.  Living in Canada, I am pricing my portfolio in Canadian dollars.  Yet I own a lot of US stocks.  The price of these stocks in Canadian dollars is hurt when the Loonie goes up.  That has happened over the last few weeks.  The dollar has traded up some 4% since the end of June.  That is a difficult headwind to combat.   The good thing about the movement of the dollar is that it tends to act counter trend to the stocks I own.  Its a natural hedge, which is appreciated during a market malaise, but a bit frustrating right now.

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