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Week 73: A short update

Portfolio Performance

(Note that I am now posting my portfolio composition and list of trades at the end of the post)


This is going to be a short update.  I wanted to get this out over the weekend but did not have time.  The performance snap-shot is as of last Friday, so it does not include the rather impressive moves that occurred yesterday in Impac Mortgage (IMH), Nam Tai (NTE) and Equal Energy (EQU).  To just briefly touch on what happened yesterday, a fund named Iszo Capital announced a 6.2% position in Impac Mortgage after the market closed yesterday.  As for Nam Tai, the company released a video on their website that suggested sales could hit $300 billion per month in the future.  This would be quite the jump from current levels, as the company did $380 million in sales in the third quarter. Read more

Why is PHH Corp so cheap?

Let’s just get right to it.  I don’t understand why PHH is as cheap as it is.

I have talked about this before, and I don’t want to reiterate the conclusions of my prior post on PHH (You can be a stock market genius: By Buying PHH Corp), but I do want to take a look at the company from a slightly different perspective to show that, even after the 50% run up since my original post, it remains undervalued.

This week, during one of my lunch hours, I made a comparison between PHH and Nationstar.  I was somewhat surprised by the results.   The table below lists key statistics of the mortgage origination and servicing businesses for both companies. Read more

Those who know it best…

There was a time when I was a big commodity bull.

Now just to clarify, I am still somewhat of a commodity bull. I like some oil stocks, I like a gold stock or two, I think natural gas is going to surprise to the upside and I’m looking at the lumber stocks.  But there was a time, back in 2004 and 2005 and even 2006 when I was a real China growth story commodity bull.  I was all about copper and zinc and nickel and demand for those metals from China.

Well that was another time but there are lessons to be learned.  Here is an anecdote that has relevance today.  Around the end of 2004 I was trying to figure out if I should get into Aur Resources. Aur was a Canadian stock mined copper in Chile.  I  remember it was around this time of year that I was looking at the stock, and it had just moved higher yet again.  So I liked what I saw about the company, and I really liked the idea that we were near the beginning of a super-cycle in the base metals, but there was this problem – the stocks had jumped significantly.  Aur Resources was a $2 stock that had quickly become a $6 stock in the past year.

And what’s more, the insiders were selling.

I remember this, because at the time I was pretty new to investing and from what I had read insider selling was a really bad red flag.  If the insiders didn’t want the stock, and I mean they knew everything there was to know right, there must be a disaster around the corner.

I don’t have all the statistics from 2004, but here is a list of insider sales I dug up from January 2005, available from the Northern Miner.  Take a look; its mining company after mining company, some of them with directors and executives selling hundreds of thousands or millions of dollars worth of shares.  It was a rush to the exit.  There is Aur Resources, along with other names like Inmet Mining, Teck Cominco, Inco and so on, all with big sales. Read more

Impac Mortgage: A Growth And Value Story

I wrote the following article on the weekend for SeekingAlpha publication.  Hopefully it will be published on SeekingAlpha in the next few days.

Impac Mortgage Holdings (IMH) is a very simple thesis and so I am going to get straight to the point. Impac is a mortgage originator and real estate services provider that has been growing their origination business at an impressive rate. In addition to its two operating segments, the company has discontinued operations in run-off associated with its pre-2008 activities in mortgage lending and as the manager and residual holder of non-recourse trusts.

Impac earned $1.50 per share from mortgage originations and real estate services in the third quarter. The mortgage origination business pulled in earnings per share of $1.04, while real estate services business earned $0.46. Below are earnings for these two segments over the first three quarters of 2012.

In addition to these strong numbers, growth is expected to continue to be strong going forward. The company noted on the third quarter conference call that origination volumes in October were another 22% higher than the average monthly volume in Q3. Read more