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Posts from the ‘Cherry Hill Mortgage (CHMI)’ Category

Week 141: Portfolio Allocation

Portfolio Performance


See the end of the post for the current make up of my portfolio and the last four weeks of trades.


Recent Developments

I’ve been on vacation and so am a couple weeks late getting an update out.

My portfolio had a big move up, thanks mostly to the movement of Pacific Ethanol and MagicJack. Pacific Ethanol had a one day gain of 67% last Thursday, and is nearly a 4-bagger since I bought in. MagicJack is nearly a double.

But what has really helped is that even before the run-up Pacific Ethanol was my largest position. MagicJack was my fourth largest position.

One of the ironies of writing about the stocks I own, is that what I write about most is often not what I have the biggest position in.  The stocks I have the most to say about are the one’s that are on the cusp, where I am constantly debating whether to hold on to them or not.  My biggest positions; Pacific Ethanol, Yellow Media and MagicJack, for example, I have written only a single post about.  That post states the thesis, and as long as that thesis is valid I don’t have much else to say.

Yet the stocks in my portfolio are far from being of equal weighting.   I usually have a lot of stocks. Unless the market is going down, the stocks number at least 30 and has recently approached 40. But most of the positions are quite small, in the 1-2% range.  These as starter positions; enough to keep me interested and following the company, but not enough to hurt me too much. If my thesis for these companies plays out, or if, as I learn more I become more comfortable with the idea, I add.  If not, if the company materially lags or sometimes if time simply passes and I lose interest in the idea, I drop the position and move on. Read more


New Position in Cherry Hill Mortgage (CHMI)

I was going to put this in my update post but its gotten a little long so I thought I’d pop it out on its own.  I’ve talked a lot about New Residential and how much I like mortgage servicing rights as a play on a stronger economy and on rising rates. Well a few weeks ago a fellow who follows the blog wrote me about Cherry Hill Mortgage, a company that, like New Residential, is a REIT that holds mortgage servicing rights.   It took me a few weeks to find the time to look at the company and another week afterthat for it to really sink in just how cheap it was comparatively. But once it did I felt compelled to take a position.

It was a bit of unfortunate timing; I had to sell about 25% of my (albeit unreasonably large) position in New Residential to fund the purchase.  I wasn’t comfortable going on margin to fund the purchase.  So I took that New Residential position down from 20% to 15%.  Of course the day after I sold New Res at $6 the stock popped to $6.30. Maybe my sacrifice to the gods of trading was appreciated.

Nevertheless, in the long run I hope to be well compensated for my position in Cherry Hill.  Cherry Hill is being spun out of the mortgage originator Freedom Mortgage.  Soon after the IPO, the company purchased two pools of mortgage servicing rights from Freedom Mortgage. I ran some quick numbers and it looks like the company paid a reasonable price for these assets. In the table below the assets have been valued at cost: Read more