Reminiscences of a Stockblogger

Oct 2

Returning to PHH Corp

On September 19th I received an email from a friend (hat tip @VermeulenGold) that an activist investor, Orange Capital, had taken a 5% position in PHH and written a letter to management outlining their recommendations on creating shareholder value. I immediately took a position in the stock.

In order to describe why I acted so quickly, let’s go back to why I sold PHH in the spring. There were two reasons. One was my concern that gain on sale margins would compress significantly – a concern that remains valid today (and could still be my undoing with the stock). The other was that there just didn’t seem to be a catalyst to realize the valuation gap that I saw.

Now, with that catalyst having materialized, I want to be along for the ride.

I wrote about PHH over a year ago. I described the company as having Joel Greenblatt type of spin-off potential. The company had two disparate businesses with little in common. There were aspects of the one business that clouded the accounting of the other. And one of those businesses, mortgage origination, had a not well understood but valuable asset in the mortgage servicing rights that were held.

Now that I have had a chance to read the Orange Capital letter in full, I am happy to see them draw similar conclusions. I added to my position in the company on Monday. It’s a 4.5% position.

The Orange Capital Letter

I would recommend reading the letter in full, it is available here, but briefly, these are the four initiatives suggested by Orange Capital: Read more

Sep 28

2 Comments

Leon Cooperman’s roadmap for Arbor Realty

I have to admit I don’t know a lot about Leon Cooperman, except that I see him on CNBC every once in a while and they make a big deal of that like he’s a heavy weight. Nevertheless, this was enough of an introduction so that when I saw his name come up on the questioner list of Arbor Realty’s second quarter call, I took notice.

Cooperman distilled the idea behind Arbor with clarity. I’ve reposted the most relevant comment below but I would recommend reading the entire exchange (available from Seeking Alpha):

Lee Cooperman – Omega Advisors

Most exciting thing you said this morning, I am trying to understand if I am correct in my understanding. I have been said that you thought you can get a mid-teens leverage return on capital. So, I am trying to forget the linkage of FFO to the mid-teens leverage return on capital. Let’s just say we use an average number, make it easy for you, $8 book value at a 15% return, would imply like $1.20 or so of ongoing earnings and I am curious whether that is a goal that you see as realistic. How that relates to FFO and do you have a timetable in mind for when that kind of profitability to be achieved. This is well above we’re currently earning. And secondly, does the access to the deferred market make it likely that we won’t have to resort to any equity financing, anytime in the foreseeable future?

Sep 15

6 Comments

Week 115: On Purges and Renaissance

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 ended the month on a high note, at a new all-time high after gains this week from Gastar, Tronox, and Entrec, and notable gains over the last month from Axia, Novus, Ainsworth, Equal and Monarch Financial.

Gastar’s rise took place after the company announced a major asset purchase in the Hunton I wasn’t as enthused about the purchase as the market because I didn’t see the purchase price, which worked out to a little under $100,000 per flowing boe, as particularly cheap, but I understand that the move further consolidates Gastar’s position in the Hunton, and that the news that the company’s fifth well was producing 160 bopd on 1/3 of the well lateral was another positive datapoint to the field’s potential.

In the case of Tronox, apparently there is some speculation that Huntsman may be about to make a play on the company. This was reported on SeekingAlpha.

I’m not really sure what drove the share price of Entrec on Friday though I think its more of a sector move. The stock had been floating down on low volume for a couple of weeks. It was anything but low volume on the move up on Friday, trading over 1.6 million shares. Read more

Sep 12

10 Comments

Some Cheap Canadian Stocks (Part II)

As the second part of my post about Canadian stocks I have been adding to recently I want to discuss 3 oil related businesses, Entrec Corporation (ENT.v), Palliser Oil and Gas (PXL.v) and Tesla Exploration (TXL.to)

Entrec Corp (ENT.v)

Another company of which I took a position in the last week is Entrec. Entrec provides oversized hauling, crane services and rigging services in Northern Alberta and the British Columbia. The company was a part of Flint Services until April 2011 when they sold the business to EIS Capital. At the same time EIS acquired a whole bunch of oilfield and transportation services companies (see the 2011 news releases for the past list) amalgamated the companies with Entrec and renamed the consolidated entity to Entrec.

Entrec has been on an acquisition spree since that time. It looks like they’ve acquired 10 different companies, most of which are small, trucking and hauling entities. According to Canaccord (a report which I googled and is available here ) Entrec’s acquisitions between July 2011 and the end of December have averaged 3.44x EBITDA. The latest, GT Crane and Transportation Services, was acquired for 3.5x EBITDA. Read more