Closing Portfolio Positions

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April 17, 2009 | SIN Picks | | Author Asif

April has been a kind month to the SINLetter model portfolio with the portfolio up more than 10% in less than three weeks. The rally that started on March 9 has continued unabated with the Nasdaq posting a gain of over 30% and the S&P 500 up more than 28% over the last six weeks. In the Special Reports update I posted on March 11, I wrote,

“The powerful rally staged by the market yesterday from extremely oversold levels is being construed by some as the first rebound from a bear market low but most investors appear to have a more sanguine view, dismissing the rally as the start of a bear market sucker’s rally. This negative sentiment leads me to believe that the rally may be more than a one day wonder.”

Sentiment appears to have changed since then and many sentiment indicators are implying that investors have become more bullish since early March. The fundamentals don’t support a rally of this magnitude and some of the “earnings” we are seeing from the big banks can be attributed to the change in mark-to-market rules and profitable counter party trades against AIG. I would like to use this rally as an opportunity to close out of several positions in the Special Reports portfolio and the SINLetter model portfolio, some of them at tidy gains and others at steep losses.

I am selling apartment REIT AIMCO (AIV) from the special reports portfolio for a roughly 36% gain, while retaining our other apartment REIT AvalonBay (AVB), which is up more than 43% since the first special report was published on February 23.

I am also selling PICO Holdings (PICO), Intel (INTC), Tata Motors (TTM), Barclays (BCS) and WisdomTree Investments (WSDT.PK). We invested in Barclays because of the potential of its iShares ETF division and with the bank’s decision to sell its crown jewel iShares division at fire sale prices, I don’t see much point in holding on to a company that is at this point no more than a globally diversified bank. The stock has also quadrupled from its January 23 lows of $3.07.

The iShares division had assets under management (AUM) of $331 billion as of the end of 2008. The expected sale price of $4.2 billion, is just 1.27% of AUM. Using this valuation, our other (unfortunately disastrous) ETF play WisdomTree Investments should be worth just a little more than one third its current market cap. As of yesterday, WisdomTree’s ETF AUM  were $3.07 billion.

I hold all the stocks mentioned in this blog entry in my personal portfolios. I will also execute these trades in my personal portfolio with the exception of Intel and Tata Motors where I am going to sell my earlier positions for long-term tax losses but will retain more recently acquired shares at lower prices.

The closing price today will be used as the selling price for these stocks.

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