Reminiscences of a Stockblogger

Nov 4

Week 70: A stock pickers Market

Portfolio Performance

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

Update

I didn’t get around to writing an update last week because I was busy with other research that could not wait. So its been 3 weeks since I updated my portfolio and transactions and quite a bit has happened over that time.

Over time my portfolio has slowly morphed into a vehicle for playing the housing recovery. I had large moves to the upside in a number of my housing related positions, with the most pronounced being of course Impac Mortgage (IMH), but also from Radian Group (RDN), MGIC (MTG) and a number of my regional banks with strong mortgage banking operations. Its been a good 3 weeks.

In this post I want to talk about some of the changes I’ve made over the last 3 weeks. To summarize:

I sold out of all my gold stocks other then Atna Resources (ATN)
I made a brief foray into, and then out of, US E&P’s
I am out of JC Penney (JCP)… for now
I am into Avenex Energy (AVF) and a homebuilder (HOV)

I will address each of these in order, followed by a brief discussion of what to expect from Nam Tai, which reports earning on Monday and of which I want to be clear of my expectations and actions. But first I want to talk generally for a moment.

Twitter

I’m finding that I am using twitter quite a bit to post what I am doing on a more regular basis. Whenever I find a relevant article, or if I start to buy a new stock, I try to put a post up on twitter. I have also found a number of folks on there that have been useful to follow. Its a useful tool, and has the advantage over the traditional message board format in that you follow a person rather than a subject. So you aren’t wading through garbage to find nuggets. You can follow me @LSigurd. Read more

Nov 4

2 Comments

Very Pleased with Equal Energy sale of Lochend

On Friday Equal Energy announced the following:

Equal has sold its Lochend Cardium assets for cash consideration of $62 million, effective October 1^st 2012. The assets sold include current production of approximately 525 boe/d (93% light oil) based on the most recent 30 day average, related infrastructure and undeveloped land.

The sales price equates to $118,000 per flowing barrel. At the end of 2011 proven and probable reserves at Lochend were 1,621 mbbl of crude oil, 2.6 Bcf of natural gas, and 64.8 mbbl of NGL. Using those numbers, the disposition went for $29/boe of P&P. However successful drilling has been done at Lochend since that time so their will undoubtedly be higher reserves attributed to the area when the year end reserve report is completed, so take that number with a grain of salt.

The sale removes the last of the Canadian land assets. All that is remaining now are royalty interests that I would imagine will sold in short order. Together with the sale of the Mississippian interest, and the Viking land at Halkirk, Equal has reduced its debt down to a minimal amount.

Nov 4

On Barrons on Radian

There was a piece published in Barrons this weekend on Radian Group. Barrons is free this weekend so anyone can access it here. The article. written by Jonathan Laing follows quite closely the arguments written in this SeekingAlpha piece. Honestly, there is so much overlap between the two articles that I would have hoped that the writer of the Barrons piece contacted OliverDavies, who wrote the SeekingAlpha article, before writing his.

In my post, Does Radian Guaranty have a liquidity problem?, I considered most of the arguments made by Barrons and even came up with my own spreadsheet model to see if they were valid I have yet to hear of any major errors in my analysis, and it is an analysis I have went over a number of times since then in order to verify. Thus I remain of the opinion that my analysis is fair and that my conclusion that Radian Guaranty will not run into a liquidity problem absent the drop of another shoe in the housing market.

I have to wonder whether Johnathan Laing ran his own cash flow analysis before publishing his work. Did he create a model that showed Radian Guaranty would run out of cash? I would love to see that model. I am not academic about this argument; if someone can prove me wrong I will sell my stock and move on. I really couldn’t care less whether I am right or not, I only want to make money on the opportunity. Read more

Nov 2

3 Comments

Summing up Earnings: Impac Mortgage, Rurban Financial, PremierWest Bancorp

In the next few posts I will summarize my thoughts on the quarterly earnings reports released so far for the companies I own. In this post I am going to look at Impac Mortgage, Rurban Financial, and PremierWest Bancorp. I will follow that up shortly with another post that looks at Radian Group, PVF Capital and Community Bankers Trust.

Impac Mortgage

In my post last week on Impac Mortgage, I noted the following concern:

In my opinion, the biggest short term risk is that the third quarter GAAP number disappoints. This could easily happen as a result of further charges to the repurchase reserve or mark to market changes to the trusts that overwhelm the profitability of the operating business. Given the run-up in the stock, a low GAAP number could cause some of the short term holders that haven’t looked closely at the businesses to run for the exits.

As it turned out my fear of a poor GAAP number was realized, but the strength of the underlying mortgage origination business was impossible to ignore, and the stock shot up higher anyways.

I was pleasantly surprised with the results. The mortgage origination segment outperformed even my most optimistic expectations. Lending volumes increased 33% quarter over quarter. Earnings from the segment increased an astonishing 100% quarter over quarter. Further, the company said on the conference call that October volumes were $290 million, which, if extrapolated for the entire quarter, would be another 22% quarter over quarter rise in the fourth quarter from the $709 million originated in Q3. Read more