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They say you should not look a gift horse in the mouth. Sorry folks, sometimes you do. In the case of the recently catapulting Newcastle Investment Corp. (NYSE: NCT), which I bought at 60 cents a share, I am.I have been following this company for a while and have both made and lost money. Although it started out as a penny stock for me it has jumped over 150% in a week and closed today at $3.61 up $0.39 (12.11%) -- for a total gain to date of 502%. So why am I complaining?
The reason is that I cannot find out what the stimulus was to make it out pace an already exuberant market. The following is a two month chart.
The earnings report out two weeks ago only convinced me it was not going out of business (yet) but it did not seem like a reason for such glee. I have not found dramatic news regarding the CMBS market, nor is there news of insider buying, or even Newcastle buying back shares. I hope we do not find out that this is just another Wall Street scam. Perhaps that news will be announced in the near future but for now there is nothing.
The following ten year chart explains why I was interested in Newcastle. Recently I have made mention of "my pal Sir John" (Templeton) in recent stories and you can see here that the stock was trading for dead, at it's all time low.
I decided that I could make money as long as the company stayed in business. Well, for now it has, and I have, but I would feel much more secure if I had some tidbit of a reason for my good fortune. It's not just curiosity or even fear. I want to learn because there might be a lesson that I could apply again.
Maybe the stock has been juiced by speculators betting that the federal government will buttress the CMBS market. For now I will be vigilant and take a portion of my gain off the table. If anyone has any information to share I'm sure there will be many investors who will have great interest.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares and options of NCT.
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Reader Comments (Page 1 of 1)
9-23-2009 @ 1:16PM
katgod said...
sounds like you were gambling to begin with and now want to know why your gamble payed off. The reason is luck unless you had a reason to invest in which case the question is does that reason still apply?
9-23-2009 @ 11:06AM
Sheldon L said...
kat,
1) Clearly there were reasons for buying NCT. I have a larger stake in real estate than stocks and understand that market well. The company got caught in a bad storm and the CMBS market then evaporated entirely. I felt the up-side outweighed the down-side, and for now seem to be correct.
2) Saying it is luck is to miss the point. Everyone knows that some luck is involved. That is not the question at all. The question is WHY now? WHY so much so fast? And WHY without any reported catalyst?
9-23-2009 @ 6:13PM
katgod said...
O.K. I understand your question now, but I would ask the same question about many stocks that have gone up for no apparent reason. I understand your wanting to know and I have these same questions about my stocks when they go up and down but most of the time I am in the dark and just rely on my original reasons for buying said stock.
9-23-2009 @ 5:02PM
buttonwood72 said...
Sheldon:
Excellent post and questions you’ve asked. I congratulate you on your gain. I was watching NCT at a buck but didn’t pull the trigger. I did however pick up a few shares of Maguire Properties (MGP) a few days ago and have some short term gains to ponder.
I suspect there’s a growing perception by the investing public that commercial real estate -- although struggling no doubt -- will not face a cataclysmic implosion the way residential real estate did. Since commercial was priced as such, traders have decided to bid it back upward. Those priced for Armageddon, such as NCT, will have a vigorous bounce back. I suspect a lot of level 2 assets of many reits and other real estate investors will be marked up in the current and future quarters.
Many CMBS holders have seen some vigorous price jumps in recent weeks. In addition to NCT , AHR, ABR, RWT and others have participated to varying degrees. Time will tell if this perception becomes a new long term reality.
Regards
OT: for a non-real estate play on the solidifying of Level 2 assets take a look at KFN. It’s treated me well recently. Though be forewarned: as a publicly traded partnership you’ll receive a K-1. Even if you hold it in your IRA.
9-26-2009 @ 1:24AM
Beltway Greg said...
Sheldon, another 15+ pop in ISRG. You are the undisputed master this year. Now run for the exit.
10-14-2009 @ 3:08PM
John Mylant said...
We may not be doe with NTC at this point. The tech's on the company seem to have a good healthy upswing and we have a Symmetrical Triangle formation. We my move back up to that $3.00 range again before all is said and done with!
John Mylant
http://mylantsmoneyblog.typepad.com/