For several years I held Washington Mutual (NYSE: WM) stock, happy with some slow growth and a very sizable dividend yield. It was so stable for so long that I and others included it in our 'safe havens' selections. This eventually turned into a disaster with the collapse of the financial sector and WaMu along with it.
There is quite a lot of debate as to whether it is time to get back into financial stocks or if we are in for years of more torment in the sector. The bad news and write-downs certainly have not abated recently.
My colleague Zac Bissonnette posted Value investors leap out of financials: sign of a bottom? raising the issue of capitulation by those who might have been hanging on to a shred of hope for a turnaround. Now they are taking their losses. Perhaps they will take advantage of the 30-day rule and get back in next month after booking the losses.
In the meantime I am on the WaMu bandwagon again. I have seen first hand what they are doing to turn the company around. They have cut staff and payroll, cut the dividend, sold off real estate and done sale lease-backs for some, written off billions of dollars in bad loans, improved loan quality and started pursuing commercial real estate loans with very conservative standards (for a change), including one with my investment company -- Thanks to Brian F.
For a bank that has been rumored for months to be a serious contender for collapse or buyout, it seems WaMu is anything but from what I see. They have signed a lease to rent space at a desirable Los Angeles location that I am a limited partner in, and they are developing a new branch about a mile from my office.
WaMu is one of the ten stocks I recently targeted and you can see the latest in Chasing Value: Financials risky but up 26%. Last week we bought some shares at $3.50 doubling down on our remaining position. Yesterday the stock closed at $4.04, down with the overall market, and we are still looking at it, to possibly extend our position further.
UPDATE: This story was written about 1:30 AM (PST) and I awoke to find my order to buy was executed at $4.00, so to continue my policy of full disclosure -- I have bought more WM. It is currently trading at $4.12 at 9.34 AM PST. I will follow-up after the market close. FINAL: WM closed at $4.27, up $0.23 or 5.69%.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of WM.
Cramer on BloggingStocks: Don't paint everything with the jobs brush
Seven banks go up in smoke ahead of the holiday weekend
Sears offering hedge for consumers who lose their job -- good idea?
Reader Comments (Page 1 of 1)
9-05-2008 @ 2:17PM
marc said...
I agree strongly with this blog- wamu great bank- had alot of exposure to mortgage market- will emerge strong when this is over- not so diffrent than the other banks and punished very badly-anyone who banks there knows it is a great bank to do business with
9-05-2008 @ 4:36PM
Bob said...
" they started pursuing commercial real estate loans with very conservative standards (for a change), including one with my investment company -- Thanks to Brian F. "......
Not a bad way to get someone's endorsement of their bank and stock....
I am sure this had absolutely nothing to do with this article.... < wink >
9-05-2008 @ 6:07PM
Sheldon L said...
Bob,
Your suggestion of impropriety is possibly indicative of your own corrupt thinking.
The investment on our part and past investments were not known to the loan department and I have never met nor do I have any dealings with the underwriters so you are a novice. Losing money on buying the stock would not offset the marginal loan spreads between lenders -- so your theory is ludicrous.
The lender had no idea of my AOL relationship prior to contacting me based on our track record and strong credit.
Furthermore everything I do is disclosed.
...perhaps you are just one more conspiracy theorist...are you having trouble getting a loan?
9-05-2008 @ 7:03PM
william lindblad said...
Shell, well said.
Integrity is lacking these days, one of the reasons for the general chaos.
Keep it as it is rare.
9-11-2008 @ 3:05AM
mike said...
Ya, Wamu... Great stock.
Ha Ha Ha Ha Ha Ha Ha Ha Ha Ha
9-11-2008 @ 11:30AM
Sheldon L said...
I just activated mike's comment -- for those that are not aware we have the ability to omit comments.
His comment is not kind or informative but I can not hide from the truth. My timing of this pick was BAD. It worked for 72 hours and then tanked.
I do not know who the smartest guy on the web is, but at least I hope to compete for the top spot as the one with the highest level of integrity.
We don't know how the WaMu Story will end and everything I wrote about in this post is true. However, if they do not have the cash to stave off further collapse then everything I wrote about above was too little too late.
I will post about WaMu again today as a follow-up and give Mike his 15 seconds.
9-13-2008 @ 8:12PM
Bob said...
wm is at 2.43 now are you going to double down again?
9-14-2008 @ 12:20AM
Sheldon L said...
Bob,
WM closed 9/12/08 at $2.73
See: http://www.bloggingstocks.com/2008/09/12/chasing-value-goldman-sachs-upgrades-wamu-says-well-be-fine/
I am thinking about it but I am also thinking about whether WM gets diluted raising cash. That might be more likely than it folding.
I can not offer you specifc advice. You should speak with your own personal advisors.