I’ve been lazy!
OK I admit it. It has been too long since I have posted. But it’s summer and I’ve been busy. Well, not exactly busy, rather travelling and, yes, of course, extremely lazy. However, sometimes lazy, going-on slothful, is the way to go in investing.
Does that mean I haven’t been doing anything with my portfolio? Once again, not exactly. With the sale of the second half of my ASCMA position in early July I had to think about what to do with the shekels I now had burning a hole in my pocket. Unfortunately I didn’t have a lot of time to ferret out new and extremely undervalued businesses. But when I did have a few minutes to look around, I found…. NOT MUCH of interest. Everything was too expensive. What to do? Since three of my existing holdings were down around their yearly lows, what better than to add a bit to these positions? So I’ve added to positions is BAC.WS.A, AIG and GYRO. Notwithstanding Mr. Market’s current assessment, I think all three represent great value.
I added to my BAC.WS.A position at $5.50 in June and now again at $4.60 in July. We’ve still got 8 years for this story to play out and I really think it will. I am undeterred even if my position is now more than 20% underwater.
As to AIG, I added another 20% to my holdings at $27.50, which brings down my average cost to just under $30 a share.
Thirdly, I added to my small position in GYRO; they just announced a rights offering, causing a slight dip in the share price. Why the rights offering, you may ask. I know I did. The ostensible reason is to fund the ongoing lawsuit with the State of New York as well as to fund ongoing operations. Mind you, they haven’t priced the offering yet and may never have to if the NY State appeal is rejected in the near future. But I do think it prudent that they are preparing in case the appeal drags on, and on, and on. Management may have also used the rights offering announcement as a kind of warning; the rights exercise is limited to those holding under 20% of outstanding shares, which means potential dilution for a large shareholder seeking to get greater control. I see that Bull Dog currently owns 17% of shares outstanding, so maybe they are using this to say ‘don’t buy any more, or else”. In any case, I was heartened to see that the press release announcing the rights offering included a statement in which the earlier-stated goal of liquidating the company over the long-term was reiterated. As to the outcome of the appeal, I have read both the State’s appeal and GYRO’s response and my opinion, having absolutely no legal background, is that I don’t see that the State has much of a case; they seem to have thrown themselves on the mercy of the court and asked the judge to be ‘fair’ to the people of New York who will have to pay the large settlement cost. A kind of weak argument, if you ask me, but then again you never know.
I’m still in slow liquidation mode here. Unless a fantastic opportunity presents itself over the next year an a half my strategy is to exit positions as they reach their target sell price (hopefully) and reinvest only a portion. This is the pre-election period and historically it has been positive for equities. Once we tick by the next election, though, hold on to your hats. To mix metaphors I think the can we are kicking down the road now, economically speaking, will be coming to roost in late 2012 or 2013. (Ray Dalio seems to be of the same mind.. see the New Yorker article on Bridgewater Associates). Happy summer investing to all!