This last week has been jam packed full of news, earnings and outsized moves. I don’t think I have ever had as many 10%+ days for stocks that I own (or have recently owned but unfortunately sold) as I did in the last week. While some of these moves do not seem attributable to any specific news (such as First Mariner and Atlantic Coast Financial) most of them do. And while I have not had time to fully digest all of the news (I haven’t had time to review what announced spin-off for IDT and so therefore won’t be touching on that) I did want to discuss the stocks that I have reviewed and can comment on in the paragraphs below:
I sold out of MBIA in all but one account about two weeks ago, which is unfortunate timing given what has transpired. Nevertheless I had my reasons, they remain valid, and you gain little by looking back at bad luck. When the stock dipped into the $13’s on the day of the announcement I was really surprised, I mean the Bank of America deal was what we had all been waiting for, but I took advantage of the opportunity and loaded up the truck with stock. Therefore MBIA is a large position for me right now – it seemed very close to a sure bet in the mid-13’s and so I bought 11% position, going on some margin to do so.
At some point shortly I am going to have to reduce that position (I’m uncomfortable with it being this large) but I am waiting for at least the conference call tomorrow to do that. And what I do with my shares will really depend on what is said – in particular what management says about structured unit on call. They may come out and say that they have commuted the worst exposure, the unit isn’t going to regulator, and they expect to realize ABV of $10 from it. In that case maybe MBIA is worth quite a bit more than National alone. We shall see. Read more
Early last year I warmed up to the idea that housing was in the early stages of recovery and this single idea generated a number of successful investments for me (NCT, NSM, IMH, MTG, RDN, HOV…). With many of these housing investments having now played out I have been trying to think of what big idea might drive my strategy in the next 9-12 months.
What occurred to me rather suddenly this week was that perhaps I had already figured that out, had even been acting on the idea, though I had not articulated it consciously.
Companies with excessive leverage have been shunned for the past 5 years. Many have lagged as questions about their ability to continue as a going-concern have superseded any potential out-performance to the upside if things take off.
I think that this might be the year that changes. Read more
Arkansas Best is my second foray into the trucking world. Its discovery I owe to @Largcaptrader1 on twitter, who pointed out to me that the company may be a better way to play the industry than YRC Worldwide.
This is a much simpler investment idea than YRC Worldwide. While it took me weeks to wrap my head around all of the debt, liabilities and history of YRC Worldwide, it took me a couple days to get to the core of Arkansas Best.
But that isn’t to say that this is an easy win. The issue with Arkansas Best is singular, but it’s outcome is not easily determined. Just how well the investment plays out depends almost entirely on the outcome of negotiations with the Teamster union for the soon to be expired workers contract.
A bit of Background
Arkansas Best is a less-than-load trucker, very much a competitor of YRC Worldwide (which I wrote about the other day). Like YRC Worldwide, Arkansas Best is burdened by high costs relative to their competitors due to the high level of union employees. However unlike YRC Worldwide, Arkansas Best has been able to get by and be very marginally profitable without modifications to their employee contracts. They have an efficient operation that is mostly cash positive of an operating basis and that appears to be close to cash neutral after considering CAPEX requirements. They have far less debt than YRC Worldwide ($195 million versus 1.4 billion) and the company trades at a discount to book value ($11.55). Read more