- We started Portfolio Recovery Associates (PRAA) a few weeks ago as it was one of the few names still holding in a good technical position; the stock was trading above all key moving averages. In this market, nothing lasts long and within days the stock fell off a cliff; and has since sold off to fall below all these support lines. I still like the thesis here but a reader who has owned this stock himself made a good point; this is a better stock to own near the tail end of a recession not in the beginning. If so, sometime in mid to latter 2009 this might be a more attractive entry point. We'll see. I'm selling this with a $1700 loss; so no major damage done for this position we began on Oct 1st. Now in a normal market this would be an easy sell because the chart broke down, but in this market it could simply be a stock hammered by an awful market, and nothing specific to the company. It is impossible to tell right now.
- MFA Mortgage Investments (MFA) continues to be a non performer for us - this is the second time we've lost money on this name - with an interest rate cut since we've owned it, and the potential for ANOTHER round of cuts I'd of expected this name to act much better than it has since the cost side of their business is becoming cheaper and cheaper. But the stocks in this sector are just not reacting well. This is not stock specific as every stock in this group has a similar chart. Frankly I'm scratching my head on the sector performance but obviously I am missing something that the market is seeing. So it is hard to have conviction here. I'm going to sell with a $5000 loss as the stock is up 6% today; this position was restarted in early September. Very similarly we bought this stock when it was (in a normal market) looking good, above key technical support and poised to breakout. But like 95% of stocks nowadays a potential breakout just turned into nothing more than a money losing operation.
Looked like an outperformer ready to run in early September - not so much
Looked like an outperformer in early October escaping the wrath of the market - not so much
4 comments:
Mark, I dont think the market is "looking through the valley" this time in the US. But it is doing so, in the ROW.
I still think its too early but that 9% Chinese GDP number I guess could mute some fears but who knows its accuracy. Eaton said today sales are dropping fast in BRIC countries so I'd rather listen to facts like that than any govt report.
But you know my theory - the ROW will lead America back, not vice versa - hence summer 2009 I'd expect to see a lot of former favorites to find their footing again.
I think that 9% GDP is going to drop like a rock, but its going to be the industrials (with BRIC exposure) that lead it back. So China gets the V recovery, and the US gets an L/
Yes I agree on the V
I think their official number might never show reality - maybe "7%" at trough
but in reality it might be a 2-4%
either way, we'd be mouth watering over that
It will be important to follow companies with large multi national industrial arms to hear what is "really" happening in those countries.
I think by early 2010 the globe will be recovering (ex-US) and we'll start to see that in the stocks next summer.
I'll be very interested in how the dollar is doing by then - you could have a twin propellent for multinationals if dollar starts to falter again (which it should but I guess its still considered the safety currency)
What is interesting is usually on a rebound of the market, the former leaders do NOT repeat as the future leaders. I think everyone believes this and hence why they were jumping on retail, and even financials this summer. But this could be a case where the former leaders retake their spot after a 1 year hiatus
July 1, 2008 - July 1, 2009? ;)
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