Top 1%
MBI & ABK
Started Aug 03 at 3:13 ET (By dirtyharry)
As a swing trader, when I'm looking for a long position I want several things to be in place. 1) The market as a whole should be at or near a perceived interim bottom, 2) The stock should be fundamentally strong, and 3) The stock should be at or near its perceived interim bottom.
The two stocks mentioned above do not meet criteria 2 or 3, yet they could be a great speculative play anyway, and here's why. With the recent Federal support of FNM and FRE, the mortgage insurance companies MBI and ABK may no longer face the massive defaults everyone was expecting. Their prices jumped dramatically on Friday - but this could be just the beginning. They are still trading 90% +- off of their highs for the year.
Even modest recovery could make a speculator here several 100% in returns. I prefer MBI over ABK because of their cash position. When you make this trade, keep in mind it is speculative. In real money, dedicate no more than 1% to 2% of your entire portfolio to a stock like MBI.
Ken
http://www.freevaluestockpicks.com
Top 5%
ContraryOne
Aug 04 at 2:44 ET
Based on second QTR statements:
The Third Avenue Value managers Whitman and Jensen added to their position in MBI this spring. They also hold quite a bit of Radian Group (RDN). These are pretty savvy long-term value investors and they seem to think that these companies will weather the storm. Admittedly, I have a loss in both as I have been buying on what seems to be perpetual weakness... but, it does seem the bears have overdone it on these companies.
Top 1%
dirtyharry
Aug 04 at 3:05 ET
ContraryOne -
Before the FNM / FRE bailout, I don't think the bears had overdone it at all. I think these companies were on their way out.....that they would completely fail. Only NOW that the government has stepped in to act as a backstop to FNM / FRE do I think MBI and ABK have a chance.....actually better than just "a chance".... they should come back completely. The biggest threat to them (having to pay out every dime they own in insurance claims) has pretty much been negated.
Top 5%
ContraryOne
Aug 05 at 10:23 ET
Interesting article in WSJ this morning about Third Avenue raising capital to invest in distressed companies. MBIA was mentioned.
"Mutual-fund firm Third Avenue Value Management LLC, known for its deep value-investing style, where managers look for cheap stocks, is planning to raise a private-equity fund to invest in distressed companies."
Certainly risky but Whitman has a great record and does his homework.
Top 5%
ContraryOne
Aug 08 at 10:50 ET
Hey Dirty-
Very good news on MBI this morning and nice buy on those calls. Why no bigger move today do you think.?
Top 1%
dirtyharry
Aug 09 at 1:20 ET
Not sure really. The market's behavior of late is quite odd if you ask me. AIG comes out with a $5.36B loss, and the next day everyone acts like it's business as usual. The dollar rallys and gold drops to nearly $850. This is bizzare......the gov't is FLUSHING this country with cheap dollars.....the dollar should not be rising.......2% Fed Funds rate is artificially low....lending is taking place though credit is still tight.....but no matter - The FNM / FRE creates extra money out of thin air. How a company like XOM can be trading at a 52 week low after they had the biggest quarter of any company ever.....baffling. I think we're going to see some correction out of all this........financials should DUMP. They are going to continue to have problems as the Option ARM loans unwind (even with the Fed bailouts) Still, I sold my SKF position after one day and got out about even. I will wait for this "faux rally" to complete and the maybe SKF will be down to 100 or better....I'm long gold right now and getting slammed and am not too happy at the moment.....but it will swing the other way. Logically, gold should be rising right now....all the conditions are right. MBI should ultimately rise as well. I got far out calls so I'm not watching the clock on this trade. I have plenty of time to see that stock go back to more normalized price levels.
Top 1%
dirtyharry
Aug 18 at 4:07 ET
So far, so good. MBI is up 61% in just 2 weeks - and I expect a whole lot more.
http://www.freevaluestockpicks.com