January 9, 2013 Comments

Melcor gave back 8.2% today closing at $18.70 But it is still up about 19% this brand new year. As I mentioned yesterday the trading is thin and it was not cleat that yesterday’s close of $20.37 was where the stock really ought to settle out after the news about the REIT plans. Today only 36,000 shares traded so again it may continue to be volatile. Today at least will have benefited from at least some time for those few analysts that watch this stock to have done some calculations. They will probably try to estimate what the REIT will trade at and what Melcor will trade at after the planned spin-off. (That is not an approach that I use).

Perhaps the best move was those who sold yesterday. Time will tell.

It’s interesting that having seen the $20.37 price yesterday that tends to put price in our minds and we may tend to be reluctant to sell much below that. It’s mostly an irrational feeling. After all the $20.37 price (and the high yesterday of $21.25) were reached in a moment of excitement on thin trading and with a lack of much information or time for analysis. And maybe it is wise to hang on for that $20+ price/ Melcor would not likely have looked into doing this REIT business if they thought that the price was not going to go up significantly. And I am not sure that a 20% rise really would have been enough for them to do this. So certainly it is very possible indeed that before long we could see that $20+ price again.

But keep in mind there are other factors that can drive the stock higher or lower including interest rates, the outlook for home building in Alberta and its Q4 earnings report and outlook for 2013.

Overall, I inclined to hold on at this point though I also see nothing wrong with selling a portion to grab some gains.

In other developments… Bank of America was down 4.6% apparently after being “downgraded” by Credit Suisse analysts. Perhaps it is ironic but I tend to pay zero attention to what other analysts think about any stock. It may be a sign of over confidence but I very rarely even read much less pay attention to any stock research reports other than my own (I make an exception for anything Warren Buffett says). If I do happen to pick up a hint from some analyst that I respect, I first run the numbers myself before deciding if a stock is a buy.

It’s somewhat bizarre that yesterday there was MAJOR news about the big banks in terms of settlements of litigation and a favorable change in the amount of cash or “liquidity” that banks have to keep on hand and yet bank shares barely budged. I would have thought that all that news would be either positive or negative overall but not neutral. And then today the stock sinks simply based on the opinion of some analyst.

Bank of America had risen quite a bit lately. It is a volatile stock and in this context I don’t think a 4.6% price drop is any particular big deal.

Shaw Communications came out with earnings that were apparently a bit better than expected. Also I believe there was a dividend increase. I have not looked at that report yet. I tend to have a slower approach to analysis and trading. It’s just not in my temperament to make a snap decision by glancing at earnings news. There are many people who would argue that success in trading comes only from keeping an eagle eye out and fingers on the trading keys. It’s been my experience that old fashioned buying good stocks (that is, companies) at what appears, after thoughtful analysis, to be good prices and then simply going along for the ride as earnings (hopefully) rise or (hopefully) the P/E multiple rises, can be a good way to invest.


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