Charlie Brown

I just tried to kick an attractive amREIT football, and whiffed.

I was away from my desk when a very minor player (NYMT) was whacked down by a hefty 17 cents from a $6.28 price yesterday.  That was the price my friend and Board Member Dan Osborne paid for 10K shares last week.  It’s also near the price where I added recently.  I hadn’t mentioned it here because of illiquidity and low market cap, so I didn’t feel right about talking about it if you can’t easily buy or sell at a reasonable piece.

I learned the lesson of illiquid stocks, or the lesson of “you snooze, you lose” yet again at the open today.  The stock was bid a $6.10 and offered at $6.14 when I saw it a couple minutes after the opening plunge.  A whopping 1,350 shares had traded in that range.

I stuck in a bid at $6.11 for a reasonable chunk.  None filled, and they immediately lifted the bid/offer back into the $6.20’s.

New York Mortgage Trust could just as easily be called Phoenix REIT, since it is rising from the ashes of a prior life.  Jim Fowler, of JMP REIT analyst fame, is the driving force behind its new life, and its recapitalization.  I count Jim among my professional buddies, as well, so I’ve held some of the stock for a while with two friends on the Board.

I thought their second quarter was decent, especially the increase in book value to $6.90.  Earnings were a little light at 16 cents a share compared to the 18 cent dividend.

Admittedly they are facing the Hobson’s Choice every MBS manager has faced this quarter, and they are tiny.  Still, I knew when I added to my position recently just under $6.30 (no, I didn’t compare notes with Dan before buying, but great minds, and all that rot)….

I guess I could have left a lowball bid GTC to deal with situations like today, but I still don’t particularly trust this market.

The lesson to take away needs to be said:  This stock is a very skittish trader.  The day after I bought it, a trade printed at $6.50.  Naturally I didn’t get to sell any there, but I was tempted to scalp a quick dollar or three from the purchase that was less than 48 hours old at the time.

While I thought about covering a month of health insurance, it immediately dropped back down.  Take the bid/offer and even the trades you see on your screen with a grain of salt on this one.  It will frustrate you beyond imagination if you try to trade it.

On the other hand, this does meet my criteria for longer-term investing — discount to liquidation value, people I know and respect running it, and a decent yield for just holding it.

Still, a few shares bought near $6 would have been nice.



One Response to Charlie Brown

  1. Patrick says:

    I’m glad you’re watching NYMT as well. I’m long the stock (and sadly, a bit underwater), but I like the additional credit risk they’re taking to try and monetize their NOLs. (Assuming they didn’t screw themselves re: IRC section 382 – that was a scary thing to see in the 10-Q.)

    I’m hoping the dividend is restored as CPRs come back to a normal range, but with refis picking up on historically low rates (FNMA 3.5s? seriously?) , I’m afraid that premium amortization expense will continue to be a drag on earnings.

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