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What are you buying during the Pull Back - Third Time


Myth465
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Alright I am hoping the third time is the charm.

 

I keep up with Rogers and Faber just to avoid being so optimistic.

I think Jim Rogers has an excellent point and its something I will remember going forward.

 

Jim Rogers - I would expect the stock market to continue to have problems over the next little while. I mean the stock market went up, Susan, for 13 or 14 months in a row with no correction at all - essentially no correction at all and that's not normal. So it's time for a correction. Whenever there's a time for a correction, the market finds a reason to correct, whether the Greece or who knows what, the market in my view is going to continue to correct for a while.

 

----

 

So whats on the watch list for you all? After the corrections last week I was able to raise 20% cash. I believe Parsad is correct, things will be a bit bumpy so one shouldnt spend the cash all in one place or at one time.

 

I plan on waiting a few days, but hope to add to SSW and LRE - IRA.

I am also watching SD and PDS and plan to buy options and leaps for both of them - Both Accounts.

I also am looking to buy back CNA and Loews in smaller portions - Taxable accounts.

 

 

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I borrow a lot of my ideas for large-caps from this board, so no need to mention those.

 

I also hold small positions in a handful of tiny-caps that made it through the past couple years with respectable balance sheets.  I'm looking at building some of the positions.  I think the risk/reward is pretty solid but things can definitely go bad quickly so I'm hesitant to really load up.

 

Hyduke Energy Services (TSE: HYD) is one I've liked for a while. Management kept too many people on payroll during the downturn, underestimating it's duration, but they got themselves sorted out and didn't dilute to do so.  They've now had a couple of profitable quarters, currently have a reasonable order backlog, and management is cautious. Highly dependent upon drilling activity. It was originally focused on Western Canada but lately they've been making inroads internationally.  In the junior oil/gas sector I also like Twin Butte (TBE), though I'm down significantly on my position.

 

A couple tech tinies that are also interesting are Sangoma (STC) and C-Com (CMI). 

 

Does anybody here follow Liquidation World (LQW)? It's a Canadian liquidation retailer that has been around for years, but it has floundered and was taken over early in 2009 by some folks involved in Big Lots.  An interesting turnaround story if they can pull it off.  Seems to me it should be possible with the right management.  It looks like they're making progress but the jury is still out.

 

 

 

 

 

 

 

 

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I really like HYD too. Trades at $0.43, has $0.77 of net-net working capital, book value is $1.30 and EPS for 2010 should be around $0.10. You cannot find an energy service company in Canada trading at such low metrics. It is at least double that much and I don't know any where you can buy well below the liquidation value of current assets alone.

 

However, I was terribly wrong with my initial purchase. I never expected the drilling downturn in Canada to be so long and brutal. The good news is that they came out leaner, the debt paid off, no dilution whatsoever and have 60% more rig building capacity with their new plant finished in 2006.

 

I expect that it will take them quite a while to return to peak utilization, but the news and capex increases from most energy service firms in Canada this quarter is very encouraging. What they have developed on the international side during the downturn is also a huge plus and something that should eventually boost earnings past their previous peak.

 

Cardboard

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Is it time for BP yet?

 

I would leave them alone. Though I think it will be profitable at the current price. I believe there are better values elsewhere. The land drillers have been just as beat up and they have no exposure to this mess.

 

I bought Coastal Energy - CEN.V at $3 or so a week ago.

 

I looked at Hyduke last year and will have to relook again. High-spec rigs seem to have high utilization and the drillers keep building them dispute the downturn. Interesting.

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As I have stated earlier I believe well reserved insurers / reinsurers will be a great buy at some point later this year (and who knows, we may be there today!). Should risk markets continue to correct, insurers will see some impairment to their capital due to investment writedowns; should we see an above average hurricane season, capital will be further constrained. The trick will be separating the pretenders from the real deal.

 

For those who want to get the bull argument, you may want to listen to the presentation from WRB at the UBS conference on May 11th (still calling for a hard market by the end of the year): http://ir.wrberkley.com/events.cfm

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Thanks for the link Viking,

 

He says industry could have 110 accident cr this year.  My favorite thing about the insurance industry is that you don't have to wait for the economic cycle, opportunities to buy come on an almost annual basis. 

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At the end of last week I bought more of what I already hold (MFC, SLF, RUS, SSW) and bought some SPY Leaps as well.  I sold most back off on the rebound.  For all the stress I put in the payback was minimal, so today I stayed clear, except, I did buy some Canfor.  Great balance sheet, continuous dividend from CFX.un, lumber prices have risen rapidly, and border issues are quiet for now. 

 

I am going to sit tight for a while because this volatility is nerve racking.  I am a lousy barometer for market stress so if its bothering me the chances are its really getting to everyone in non-value land. 

 

 

I have been trading between US and Cdn currency every few days.

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Bought some PDS (PD.UN-TO). Unfortunately, a bit early.

 

Also bought: POW-TO, ABT, GOOG (likely too early, but I will hold it).

 

Tempted by:

- GILD, ESV (is it really at $40?),  L (price vs. NAV)

 

Waiting for better entry point:

- Cdn energy: Suncor, CNQ, Encana (before nat. gas back in favor)

- for the jockey: BAM (real estate, infrastructure, hydro) or LUK

 

 

 

 

 

 

 

 

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oldye, I agree insurance is very volatile on an annual basis. Especially at the start of hurricane season; everyone seem to get skittish.

 

However, the big reason I like insurance stocks is it appears to me that they are getting close to the start of a multi year run. I remember reading 'Reminisces of a Stock Operator' and Livermore saying that the real money is made by waiting for general conditions to be favourable, to take a position and then to stick with it. "It is the big swings that make the big money for you." 

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I picked up some SD - we have Tom Ward, with just under 26m shares (so he is well motivated), FFH and  Prem personally holding as well. I was considering VXX as a way to profit from the volitilaty. Any thoughts on VXX?

 

cheers

Zorro

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Reestablished a position in Hanfeng Evergreen (TSE: HF) and bought some GOOG under $500.  Also did something I've never done before -- bought some PHYS (gold) when the market jumped on the Europe bailout.

 

Considering establishing positions in WRB and VOD. 

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I was not fast enough on last pullback

 

Trying to do homework, put in some orders with low ball offers hoping to take advantage of Mr Mrket.

 

I am currently 40% cash (unfortuneately have been at this level for much of the last year. I find myself too conservative. Too much thumbsucking)

 

I would like to:

 

add to my nat gas holding pey.un on TSE...low cost operator with ~$25 of reserves, yielding 10+%, insiders buying -hoping to purchase <$12.50

 

add PD.un -I am really underwater on this one- I think buying at <$5 would be a good deal. I feel that they should have owner's earnings of ~ $1 this year (my guess is probably not as good as others) What do others thinK.

 

Also, for those  perhaps more involved with the industry, would the following quote from Sharperdingaan apply to PD.UN:

 

“You really cannot appreciate how valuable a small footprint, heavy duty horizontal directional drill rig is, untill you have some idea as to what would be involved - & how long it would take if you didn't have that rig. Or how much of a bastard it is, to get heavy equipment into certain areas during 'mud season.”  SharperDingaan

 

...would this be an enduring competitve advantage (a small moat in a cyclical industry?-if there is such a thing)

 

I would like to add to FFH at <$360

 

If  canadian dollar goes thru par I would like to

 

purchase L  at  <$33/share (60% of IV of $55)

 

add to FRX <$26 (free cash flow >$3., almost $13 of cash net of debt on balance sheet, with some potentially promising new products which will make up for severl products losing patent protection in 2011.

 

add to FUR <$10

 

purchase starting position in JOE (have not studied enough to come up with purchase target) but looks cheap at $5000 /acre of Florida beach front

 

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doc,

 

I've followed LQW for about a decade now... What a trip. Never owned it, excluding a token position (board lot) to attend AGMs, and get annuals.

Kind of like NDN - great run growing a successful operation, then the management aged a little, made a few errors and it ran off the track (LQW to a much greater extent).

 

I've spoken to Seth a few times, he seems to know what he's doing.

His buying is much better than the former team... Doesn't want to turn this into a Walmart (former management's goal apparently).

 

They can't compete with Walmart or Dollarama, both are great at what they do. But there is a space in Canada especially in non-Winners/HomeSense markets for a BigLots/TJX style, small format store.

 

The numbers don't jive with what I've seen at the renovated stores and my scuttlebutt from store managers, but the GM seems to be improving slowly.

 

I'm on a wait and see WRT this one... plus the balance sheet is a little concerning IMO.

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RE: LQW... I held it a few years back.  Get this:  It was considered a value play at $5.00 when I held it, for about a year.

 

It is just not something I am interested in any longer.  You are waiting for some sort of growth or turnaround that is never going to come.  Retail space is so dependent on the Jockey and there is no room for error. 

 

I went for a walk with my daughter through the local downscale mall the other day.  There is a Winners, a Zellers, an Ardene store and an assortment of other low end stores all selling the same sort of garbage.  I got to wondering what the point of it all is.  They all sell the same low grade crap that no one really needs.  In essence they all compete with Liquidation World.  The slightest hint of a recession in Canada is going to push half of these retailers off the map and LQW will not be among the survivors.

 

Retailers are really difficult.  IMO you want to buy the number one or two in any space when the prices for the stock are depressed.  I have held HD since December 2008.

 

LQW could drift along for years and then finally just sort of cease to exist. 

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RE: LQW... I held it a few years back.  Get this:  It was considered a value play at $5.00 when I held it, for about a year.

 

It is just not something I am interested in any longer.  You are waiting for some sort of growth or turnaround that is never going to come.  Retail space is so dependent on the Jockey and there is no room for error. 

 

I went for a walk with my daughter through the local downscale mall the other day.  There is a Winners, a Zellers, an Ardene store and an assortment of other low end stores all selling the same sort of garbage.  I got to wondering what the point of it all is.  They all sell the same low grade crap that no one really needs.  In essence they all compete with Liquidation World.  The slightest hint of a recession in Canada is going to push half of these retailers off the map and LQW will not be among the survivors.

 

Retailers are really difficult.  IMO you want to buy the number one or two in any space when the prices for the stock are depressed.  I have held HD since December 2008.

 

LQW could drift along for years and then finally just sort of cease to exist. 

 

Agreed - this one may just putter out of steam.  I'm in it mostly because I made an error at higher prices and didn't get out of it soon enough.  I added a little more at the lows as a pure speculation on Seth's ability to generate some positive cash flow, but I'm not heavily invested and don't intend to be.  I was mostly curious to see if any others (aside from Francis Chou!) made my mistake.

 

All that said, I do think there's room for this type of retail player in Canada.  I question the point of Dollarama more than I question the point of LQW.  Every time I go into a dollar store and see little made-in-China ceramic/glass figurines of frogs/birds/children/puppies selling for $1,  I end up picturing these objects in a landfill and then find myself momentarily depressed.  Even the cheap chocolate bars can't cure the malaise.

 

When LQW was working right, they had some very reasonable inventory (amidst lots of crap, admittedly).  As a student I used to find great deals there.  But this all fell apart in the past couple years.  The stores became a nightmare; no inventory, etc.  I think this was partly due to bad management decisions, and probably also partly due to the increased presence of places like Winners / Home Outfitters.  It will be interesting to see whether they land on their feet.  It seems the inventory is improving, though the general disorganization of the older stores is still a little hard to swallow.

 

Calogeno:  What do you mean by "the numbers don't jive with...".  Are you hearing good or bad things about the new stores?  We don't have any of the new or renovated stores where I live, and the manager of our local store is flat-out nutty, so I can't see first-hand what's going on.

 

 

 

 

 

 

 

 

 

 

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doc,

 

I'm in the self-storage business -  all those $1 items end up stored in a locker/room by someone that can't afford their rent, nevermind the $100-200 a month for a storage unit... My significant other goes there for certain things; I needed two "For Sale" signs... they were $1.25 there and 3-4x that price at Canadian Tire.

 

As for LQW - The staff at the stores I've been to seem busier lately (past yr) than before, they say sales have picked up, and the manager at the renovated store I've gone to says it's busier for sure. Their sales just don't seem to recover in aggregate, but the gross margin did last quarter. I guess the renovations have only been on a few locations and this all takes much longer than one would expect. I'll get hard data next time I'm there (the renovated store).

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I have been trading between US and Cdn currency every few days.

 

Al, are you doing straight up currency, using margin or buying dual listed?

 

Ive done it with dual listed shares with decent success. Good way to make some $ in choppy waters (but like all rides on choppy waters will prob need some graval ;D)

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Selling volatility on vix spikes against my hedges with 50% cash waiting for the slow fastball down the pipe.

 

i've been doing the same in my trading account, mostly by selling index puts that have gone deep in the money & picked up delta against a basket of long stock. i'e also sold some longer dated atm calls, sparingly tho, always making sure i have the cash available to handle the possible eventual assigment. its a margin account, but i never leverage it. i basically consider my hedged trading account an alternative to holding cash....more risky but with the promise & potential for far more return.

 

mean while, in my investment account i am slowly putting the tons of reluctant cash to work that came about after the sale of of former largest position, the former co known as sns    :(

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