Raising Cash: Sold Howard Hughes Corp (HHC) and Gramercy Capital (GKK)
I’m generally not a macro investor, basically because I don’t think it’s possible to forecast where the economy or the stock market is going. But, right now I’m a bit worried. The S&P is up over 15% this year and the economic situation does not look better now than it did in January. There are a number of economic hurdles coming up shortly, the presidential election and the fiscal cliff, just to name two of the the most obvious. US politicians seem to be ignoring the HUGE government budget deficit and national debt (on both sides of the aisle they spout rhetoric but no one seems able to find a compromise – and isn’t that what leadership is really about?) All politicians seem hell-bent on kicking the can down the road rather than tackling it head on. Nothing good can come of this. I have to agree with Wexboy in his no-holds barred analysis of the current situation and the inevitability of INFLATION. So where to invest? The same places we always do, special situations, spin-offs, recaps etc. But these seem to be few and far between these days. In fact, my rate of posting is down over the summer exactly because I don’t seem to be finding ANY compelling special situation opportunities outside of the ones already in my portfolio. Usually, just about the time I begin thinking that I should lighten up on equity exposure (like now) because I can’t find any slam-dunk opportunities, Mr. Market takes a substantial drop and I’m left with little cash to take advantage of the lower prices. This time I’m moving sooner (and likely Mr. Market will instead MOVE UP this time). But it’s the comfort factor I’m after. I’m trying to build a 25% cash position. So I’ve begun selling off some positions that have either run up considerably or have added risk since I first entered them.
I’ve completely sold out of my position of Howard Hughes Corp. (HHC). I still think there is great upside in the share price but this is a company with assets that are going to take years to develop and bring to fruition. I’m in LTCG territory on all my shares and with the uncertainty of next year’s treatment of capital gains I thought it prudent to take the gain now. The position is up over 55% in the 2 years since I began accumulating it.
I’ve also sold out my position in Gramercy Capital (GKK). My investment thesis was based on restructuring or selling the company not rebuilding it. With the hiring of a new CEO 3 months ago, the Board has set a different direction (raising capital and remaining independent) from that which I had hoped. Even though the new CEO put up over $2.5 million of his own money to purchase shares (and thus filled in what I considered a weak point of my investment thesis – low or no insider ownership) I think this work-out is going to take much longer than I originally anticipated. I still think there is still considerable potential upside in the shares and I would consider repurchasing my position in the low $2 per share range.
Cash now at 12%… and counting. What’s next?