OSV Portfolio News in a Volatile Market


Pick the best value stocks with our Stock Ranks, screening and valuation tool. Try the live demo today.

What a crazy week.

1000 Point Sell Off

Nobody has any idea of what happened on Thursday and CNBC blames a typo made by a trader. I don’t buy it.

What did happen was that it finally occurred to Wall Street that markets are completely unpredictable and now you can sense the fear. The worries over Greece is only adding to the mix.

The obsession in the media is all about the stock sell off but in my view, what’s more important is that the market was obviously fairly valued with the Dow at 11,000 and I have to question why wasn’t I selling my holdings that I deemed to be of fair value?

Portfolio Holding Updates

General Growth Properties (GGP)

GGP [[GGP]] took a huge hit the past couple of days. Down 15% since Thursday. Simon Properties Group [[SPG]] upped their bid to buy out GGP at $20 per share but the management of GGP, Bill Ackman and Bruce Berkowitz are against the plan and the judge is expected to approve the deal with Brookfield Asset Management [[BAM]].

The deal with BAM is valued at $15 so GGP trading at $14 doesn’t make any sense at all.

So although my holding has been bleeding, I believe it is only temporary. The floor is clearly at $15 and if it goes any lower, I’ll have to increase my position. You may think it’s crazy to increase a position beyond 30%, but in a volatile market, special situations will save your portfolio.

Emmis Communications (EMMS)

I mentioned this on my twitter account but EMMS [[EMMS]] has been offered to be bought out at $2.40.

At the closing bell on Friday, EMMS was $2.18. If you hold till the acquisition is complete, you profit 10% with little volatility.

Three investigations are being made on behalf of EMMS shareholders in a possible breach of fiduciary duty by the EMMS board. Supposedly, the board didn’t shop around and the large shareholders believe they could have gotten a much better deal.

If this is the case, there is a possibility that the acquiring company could increase its bid. Either way, I expect this investment to be profitable.

Although I wasn’t able to buy it with my OSV portfolio, I did pick up a small amount in my other account.

Mastech Holdings (MHH)

MHH announced their 1st quarter results and while nothing stood out, neither did the results. Nothing unexpected since the economy isn’t expected to turnaround for a while.

The interesting piece of news is that MHH made an acquisition under the healthcare industry. The new subsidiary is called Mastech Healthcare and the CEO is looking for more acquisitions that will help MHH move into different fields and grow.

I’ll be waiting patiently for MHH to come around.

Bolt Technologies (BOLT)

BOLT [[BOLT]] released their 3Q results and although the street considers the results to be horrible, the cash flow states otherwise. EPS came out to be $0.08 for the quarter compared to $0.35 the previous year but look at the balance sheet and the cash flow statement to see a different story.

Cash balance increased by around $10m by reducing the accounts receivables balance by more than $7m!

Sales may be slow, but the company is being managed very well.

The oil fiasco is also bring more pressure on the oil industry and other deepwater drillers and related companies are getting hit, but there is no clear fundamental reason.

Also keep an eye on oil prices. It was around at $85 until recently and the possibility of $100 oil by year end is very real. With so much going on in the world at the moment, oil prices is last on the news list but will definitely help BOLT see increased revenues as time goes by.

Although I’m now down 12% on BOLT, selling below $10 doesn’t make sense at all.

Insmed Inc (INSM)

Third company to release earnings this month. INSM took a hit on the earnings release but I firmly believe it was for irrational reasons. One year ago, it sold its FOB business to Merck for $125m. Compare that to $118k profit this quarter. Wall Street, being Wall Street, drove the stock down a good 10% that day. The current price of $0.89 is again at NCAV value.

I was also thinking about my trading history with INSM and realized that I’ve failed to sell at a reasonable price when it was at $1.20. Not only with INSM but with many other holdings as well.

In this volatile market, I really do have to clean up my discipline on selling at intrinsic or close to intrinsic value.

Volatility

I have no idea what will happen in the coming days, weeks or months but I will keep my economic outlook that nothing looks bright. No amount of data and news is really supporting the view that the economy is improving. Everything is volatile at the moment – unemployment rates, GDP growth, Europe, national debt and healthcare.

So it’s time to dust off the watchlist and to keep an eye on overreactions as there will be many.

In today’s market buy and hold won’t help. You have to sell at intrinsic value and find or wait for new opportunities.

Don’t be afraid to sell out a losing position if a better opportunity presents itself. Locking in a 20% loss will hurt, but if the proceeds is being invested to a potential 200% return, even if it really only goes up 50%, it still beats the loss easily.

I may end up selling a lot of things in my portfolio as I reconsider my best ideas and whether it will be worth holding what I do now.

Disclosure

Long GGP, EMMS, MHH, BOLT, INSM

What is Old School Value?

Old School Value is a suite of value investing tools designed to fatten your portfolio by identifying what stocks to buy and sell.

It is a stock grader, value screener, and valuation tools for the busy investor designed to help you pick stocks 4x faster.

Check out the live preview of AMZN, MSFT, BAC, AAPL and FB.

11 responses to “OSV Portfolio News in a Volatile Market”

  1. Ankit Gupta says:

    This might be a good time to find some good short positions – find companies with bad fundamentals that should fall anyway, but the markets may just help it happen sooner.

  2. tedk81 says:

    Three investigations are being made on behalf of EMMS shareholders in a possible breach of fiduciary duty by the EMMS board. Supposedly, the board didn’t shop around and the large shareholders believe they could have gotten a much better deal.

    If this is the case, there is a possibility that the acquiring company could increase its bid. Either way, I expect this investment to be profitable.

    Just FYI, don’t put much stock in these “investigations”… they are almost always scummy ambulance chasers just trying to get their name out there. I haven’t seen an acquisition in a very very long time where some no name firm is conducting an “investigation.” Nothing ever happens even where there’s a pretty clear breach of fiduciary duty (see: VXGN.”

  3. tedk81 says:

    Oops that should read: “I haven’t seen an acquisition in a very very long time where some no name firm ISN’T conducting an “investigation.”

    Nobody has any idea of what happened on Thursday and CNBC blames a typo made by a trader. I don’t buy it.

    What did happen was that it finally occurred to Wall Street that markets are completely unpredictable and now you can sense the fear. The worries over Greece is only adding to the mix.

    And also, you don’t think something super-weird happened on some level? ACN traded at $.01, P&G traded at $40, this happened on something like 100 stocks. NYSE halted trading and so all the bids disappeared very temporarily and weird stuff happens. All those trades got busted. Definitely some sort of technical glitch.

    I sold MHH at $5 a long time ago and just re-bought it. I don’t know what I think about this “Mastech Healthcare” thing. On it’s face it seems like a bad idea, when companies get away from their core competencies like this it usually doesn’t end well. I do like their new look though, new logo, new website looks great and they still have what 5 or 6m in cash?

  4. Bart says:

    Hi Jae,

    I’ve received a very interesting paper re backtesting several of the criteria you’ve also tested, but then for European stocks. You can find it on http://www.value-investing.eu/papers.aspx, guess it might interest you and several of your (Europe-based) readers.

  5. peridotic says:

    Are you still in GRVY?

  6. Jae Jun says:

    Yes I am. Nothing has changed for me to sell out at this point.

  7. Intrinsic Jason says:

    Jae,

    Relax man. Dont let the market control your emotions.

    Love GRVY. Putting every dollar I can into it. No downside.

    Thanks

  8. Jae Jun says:

    @ Intrinsic Jason,

    LoL. 100pt drops dont worry me at all. Was actually trying to buy but couldn’t at work.

    Although there is a huge rally with Greece being bailed out, I’m still not confident how well it will go.
    My 2 cents.

    I’ll be on the lookout to sell more readily once my positions reach a certain price.

  9. Derek says:

    Appreciate your candor, Jae. These are unusual days indeed. I had been eyeballing insmed several months ago and then bought when you recommended it. I purchased at .80 and sold at $1.29. It’s one of the rare occasions when I got in and cashed out near the optimum time.
    Many other trades haven’t gone nearly as well! I’m heeding your advice to sell on modest gains instead of waiting on homeruns.

  10. Jae Jun says:

    Wow perfect timing. Again I learn a new lesson of when to sell. Since there weren’t any new fundamental changes, I too should have sold out. Got too carried away I guess.

  11. Kyle says:

    Long VIX might have been prudent here as well, I know its very late, but my first time reading this post, funny how we’re all suffering again now, over a year later, because of Greek debt concerns.

Pick Winning Stocks and Fatten Your Portfolio

LIVE PREVIEW OF AAPL, MSFT