One thing that bugs me is picking a correct thesis but backing the wrong horse. Silver is a case in point; I bought silver exposure as falling dollar/inflation hedge back in mid November [Nov 16: Market Seems to be Holding - Adding 2 Weak Dollar Plays]. I chose Silver Wheaton (SLW) as opposed to going for the simple play with the Silver ETF (SLV). As the chart above shows, a rising tide did not lift all boats - I underperformed in this position by 20% as silver rocked and did what it was supposed to do in an inflationary/Fed cut desperate environment; but my silver exposure did zilch. By trading in and out a bit I've been able to eek out a 3% gain in Silver Wheaton but it would of been obviously much easier to of bought the Silver ETF and simply let it go on cruise control.
Some of it was bad luck, as although I have traded Silver Wheaton (SLW) from time to time over the years, I did not realize Goldcorp (GG) had a 48% stake which it might be looking to sell; this was speculated in very early January 2008 by a RBC Capital Markets analyst, and has provided a major overhang for the stock.
At last, today this Goldcorp sale has finalized and hopefully the stock can begin to rebound.
Silver Wheaton Corp. ("Silver Wheaton") (NYSE:SLW - News) is pleased to announce that Goldcorp Inc. ("Goldcorp") has completed the previously announced secondary offering of 108,000,000 common shares of Silver Wheaton at a price of C$14.50 per share for gross proceeds of C$1,566,000,000.
"Goldcorp was fundamental in the formation of Silver Wheaton, and is an excellent operating partner on two of our key assets, Penasquito and San Dimas. Goldcorp's sale of their Silver Wheaton shares represents an important and positive step in the development of our company," said Silver Wheaton President and Chief Executive Officer, Peter Barnes. "This sale removes a perceived overhang in our stock while increasing market liquidity significantly, making Silver Wheaton a much more appealing long term investment, particularly to institutional investors. With a strong shareholder base, this will now allow us to capitalize on our exceptional growth prospects, with nothing to hold us back."
I still like Silver Wheaton due to it's very unique structure [Seeking Alpha: Silver Wheaton's Innovative Structure Tweaks Pure Silver Profit], which is what attracted me to this name quite a few years ago, so I plan to hold from here and see how it plays out. However, I did lose out on earlier profit opportunity...
Long Silver Wheaton in fund; no personal position
2 comments:
hey - this doesnt have to do with silver. but i surfed upon ken heebner's stock picks, and noticed that hes begining new positions in some commerical REITS. did u notice that? i'm in agreement with what your working hypothesis that the subprime /credit mess with extend to commerical real estate, but i wonder what heebner's counter thesis is.
Thanks - no I did not see that. It could simply be he is in the camp of 6 months of slowdown and back to boom by 2nd half of 2008. That seems to be the general consensus on the Street right now. Even Bernanke said it in yesterday's hearings.
As for REITs they are not all the same - something like medical office REIT should be fine. So you'd have to look at what kind of REITs he is buying. I dont have a choice on what REITs to short since I cannot short individual names - I have to buy the ETF. My beef is with office and shopping REITs - there are other REITs that should do well; heck I just bought a mortgage REIT in fact for the fund and my personal account. So it is not a monolith.
But I have no problem being against other people - even smart people. No one is correct 100% of the time and it takes 2 people to make a trade :)
At any moment my economic thesis can change based on how involved the government becomes in pushing itself into the free market. As things worsen they could take serious steps to step in and bail out and I'd have to change my views. My views are based on a free market allowed to play out which as seen by Bank of America buying Countrywide (which I believe was gov't sponsored) and other things we are seeing behind the scenes, is not the reality. So the more interference the more I have to adjust my views. 6 months ago we had none of these myriad govt home owner plans - now we've had 3-4. Etc.
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