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Jun 26

Taking Advantage of the REIT Sell-off

For some time now I have wanted to take advantage of companies that will benefit from improving credit conditions. Yet since the beginning of the year the steep run-up in these stocks has led me to limit my purchases to a small position in Arbor Realty (ABR) and a short lived position in RAIT Financial (RAS).

Thus I am pleased that we are finally seeing a significant correction in these names. The correction is being brought about by the rise in interest rates, a pullback in the credit markets (here and here), my interpretation of which is that it has been driven by a temporary oversupply and of course fears of the Fed, and investors inability to distinguish between more unconventional REIT structures that are not sensitive to increases in interest rates and simple agency and non-agency mortgage REITs that are. The companies that I am interested in are mostly agnostic to interest rate increases and in some cases will actually benefit from a rise in rates, but that hasn’t stopped them from selling off.

In the last three weeks I have taken advantage of the sell-off by buying shares in the following names:

New Residential (NRZ)
PennyMac Mortgage (PMT)
Northstar Realty (NRF) Read more

Jun 24

Gold Stocks and My Lack of Conviction

The times when I am able to make a lot of money in the stock market have been those for which I have a strong conviction in the underlying conditions. When I believe that I have either a cyclical or secular wind at my back, my inclination is to stick to an investment and hold it to significant gains.

Compare this to when I invest because something looks cheap or seems undervalued. In such cases I don’t really have conviction in the mechanism of value realization, I am often found to be the one with weak hands, and I end up selling after experiencing more pain than I can handle.

This was the case last week with gold stocks. I sold most of my positions after gold collapsed to under $1300. The stocks I sold; Argonaut Gold, Timmins Gold, and Brigus Gold, had all been much higher only days earlier. In the case of Argonaut I ended up selling for a small profit, while both Timmins and Brigus were sold for a small loss. Read more

Jun 24

1 Comment

Week 103: A Wet Update

I try to send out an update every month, but a confluence of events, including my vacation and the flooding of my hometown Calgary, has not allowed me to write about everything that I wanted to this week. Thus, I’m going to be posting this update in a series of posts over the next couple of days. I’ll start it off in this post with my performance over the last month.

Portfolio Performance

Portfolio Composition

The last four weeks of trades are available here.

Jun 14

10 Comments

Extending the idea of Extendicare

I am more superstitious than I would like to admit. For example, when I was a kid I used to take the same number of steps to my bedroom, close my door before bed to the same angle, and never step on a crack on my way to school.

Nowadays I’ve toned things down a bit but I still have a few little rituals, many of which revolve around investing. I always check MSFT when I log in before checking any other symbol (even though I don’t own it), I never check the price of a Canadian stock on Yahoo! Finance, and from time to time I “sacrifice” some stock to the gods when a particular security isn’t going my way.

While superstition can be dangerous if its left to run awry over one’s decision making, if its kept in check it is not entirely a bad thing. While we all like to believe that we are rational and objective and that therefore our conclusions always stand on their own accord, I think this is mostly a delusion. Our convictions are more based on faith than we would like to admit.

From this observation comes the usefulness of coincidence. If a leap can be made, even somewhat half-heartedly, that coincidence is born of some sort of necessary intent, its conceivable to think that this might bond you to the event that you would otherwise disregard. The result can be constructive: a firmer stand of integrity, an oath more closely held. Under less desperate circumstances, it may simply lead us to pursue an opportunity that we may have otherwise ignored. Read more