Wednesday, March 26, 2008

Bookkeeping: Closing MFA Mortgage Investments (MFA)

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As I stated earlier this week, I have portfolio creep - too many names, as I like to stay in the 50-55 range in long positions. So I am letting go of another small stake today; in MFA Mortgage Investments (MFA). This one has not been in the portfolio long and was my misguided attempt to play the "financial rebound" through mortgage REITs; and have some zig when the market zags against my commodity/global plays. Well all it's done is zag zag zag down, to the tune of a loss of 1/3rd of the position - nearly $10K. It didn't take very long to make my top 10 list of losers [Top 10 Winners and Losers] That stinks, but it happens eventually when you hold this many positions. All my purchases were in the $10s in early to mid February, and I am exiting my last batch here at $6.77. We've had our now predictable"early cycle" rebound where financials/retailers/etc that fell for weeks on end rebounded 30-40% in a week, so low $7s appears as high as MFA is going to go for now. I am cutting the loss and will revisit at a later date.

I still like the thesis behind this group *BUT* if (when?) we go through another phase of financial turmoil I could see this name being sold down further - much like FCStone Group (FCX) - once the confidence is lost, no matter what the fundamentals - entire groups of stocks are sold off en masse. This stock lost 50% within days once the confidence was lost... so with some rebound here, I am going to exit stage right and like FCX revisit down the road once the credit markets are more orderly and the risk of your stock going down 50% in a few hours based on a rumor is not an issue to wake up to every morning.

No position


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