Paul Sorkin: We Fish Deeper and We Fish Alone

This is a great video of Paul Sorkin, Hummingbird Value Fund and Columbia University Professor, about micro cap investing.

Memorable quote:

We fish deeper and we fish alone.

One company he talks about that caught my attention is Fortress International Group, Inc. (FIGI). He is confident that it can easily grow at 20% per year. At the time of the interview he was buying at $1.15, it currently trades at $0.55

Fortress International Group, Inc., through its subsidiaries, engages in consulting, planning, designing, building, and maintaining facilities, such as data centers, trading floors, call centers, network operation centers, communication facilities, laboratories, and secure bunkers. Its services include technology consulting, energy and green solutions consulting, engineering and design management, construction management, system installations, operations management, and facilities management and maintenance. The company also offers expertise for electrical, mechanical, telecommunications, security, fire protection, and building automation systems for the facilities. It serves government and homeland defense agencies, and private sector businesses in the United States.

I will be taking a closer look at this one.

Humor - Elephant in the Room

(Warning: If you are easily offend with language and such, don't play it.) hat tip: bearishnews

Amerco (UHAL) - Déjà Vu All Over Again

I was looking over a NY Times article from August 20, 2003 about U-Haul's bankruptcy.

The following quote reminds me of the current situation General Growth Properties (GGWPQ) is experiencing:

Stocks of companies that have filed for bankruptcy protection usually trade for pennies. But shares of Amerco, the company that controls U-Haul... have nearly tripled since it sought Chapter 11 protection.

General Growth's stock price has climbed over 950% from a low of around $0.49 a share. Bill Ackman, Pershing Square Capital Management and 25.6% owner, spoke about GGP's tremendous upside potential.

...estimated the value of bankrupt REIT General Growth stock at $20 to $35 per share post bankruptcy.

If that estimate holds true we are looking at a total of 4000-7000% return. You don't need too many of these in a lifetime.

Another important similarity to notice is the fact that both Amerco and General Growth have individuals on their boards advocating on behalf of shareholders. Bill Ackman's presence on the board increases the likelihood that common shareholders will come out of this bankruptcy mostly intact. This reuters article mentions this point.

Ackman said he will be a tenacious advocate for shareholders, another key for equity investors getting back their investment.

These are the kinds of opportunities you only read about.. buying dollars for pennies.

Reference:

• Bill Ackman's GGP Presentation

Are We Due For a Market Correction?

"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands." - Warren Buffett (hat tip to marketfolly)

Articles of interest:

1.  Insiders sell like there's no tomorrow, CNNMoney.com, 09/11/2009

"..there were $31 worth of insider stock sales in August for every $1 of insider buys"

2.  Rogers Holds Back From Commodity Buys Now, Bloomberg, 09/11/2009

"Investor Jim Rogers said he’s holding back from further purchases of commodities after prices soared.. Investors should wait for commodity prices to drop to buy for the long term"

3.  Death Plays, Barrons, 09/14/2009

"It's almost as if the biggest credit bubble in history never occurred. Investors are increasingly convinced that a sustainable global recovery is emerging out of the wreckage. All praise to the central bankers for saving the world! I'm waiting till someone writes about the return of the Great Moderation and suggests Ben Bernanke is the new Maestro. Then I'll know the lunatics have taken over the madhouse...yet again."

4.  China Strikes Back on Trade , Wall Street Journal, 09/14/09

China indicated Sunday it would restrict U.S. imports of chicken and auto products after Washington's move to slap punitive sanctions on Chinese tire imports, raising tensions in a trade dispute ahead of two planned meetings between the countries' leaders.

While no one can predict the future direction of the markets, string of recent news suggests it might be a good time to pocket some profits.