tag:blogger.com,1999:blog-2149523431587168680.post990865172288411009..comments2024-01-16T00:12:23.220-05:00Comments on Oddball Stocks: Investing like a lenderNate Tobikhttp://www.blogger.com/profile/05660387777171986124noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2149523431587168680.post-69614023981384836452013-11-16T03:59:24.453-05:002013-11-16T03:59:24.453-05:00That was great! thanks for sharing this good infor...That was great! thanks for sharing this good information....very good job information that I was searching for!<br />Sharon Bushhttp://www.sharonbush.me/noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-29181181058893872842012-12-14T13:30:24.930-05:002012-12-14T13:30:24.930-05:00Looking at the discussion at Value Investors' ...Looking at the discussion at Value Investors' Club, it seems that some of the professionals fell victim to the same temptation as amateurs--in the face of limited information, assuming favorable rather than unfavorable outcomes. I had a fairly large position in EHPTP with a cost basis around $1.90 (after I watched in annoyance as it migrated up from the 10 cent range) and sold a little more than half around $4, to ensure I'd break even after taxes. As the debt deadline approached, I just couldn't get comfortable with the idea that there would be residual value; it seemed like a crapshoot, as it always had, but with a maybe-firmer deadline. So I sold the rest around $2, right before it shot up, again, past $4. Oh, the regrets! But I was still uncomfortable, and decided that even with the prospect of a major payout there wasn't enough to go on. Turned out that was a good move. I could ascribe all this to my wisdom, but really it was just luck. People who argued it was worth $15+ were also dealing with luck, but on the other side. ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-22333844014820961872012-12-13T08:11:23.379-05:002012-12-13T08:11:23.379-05:00All good points. My feeling with Eagle wasn't ...All good points. My feeling with Eagle wasn't that I was smarter than any professionals but that I was at a huge disadvantage and there was some piece of critical information I was missing. <br /><br />I understand the asymmetric risk well, why do you think net-nets are so attractive? Limited downside and potentially large upside if one or two things go right. <br /><br />The distressed stuff seems like it has a lot of potential for savvy investors. Personally I'm going to stick to simple situations, and let funds with large bankrolls deal in the complex stuff. Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-88517722953221837752012-12-13T07:50:33.087-05:002012-12-13T07:50:33.087-05:00Think like a lender eh? You think that the investo...Think like a lender eh? You think that the investors that were involved in this name, many of whom are experienced distressed and real estate investors didn't get this concept? <br /><br />Or perhaps you're suggesting that they didn't really think there was a scenario where they could get wiped out?<br /><br />Let me explain what the average preferred investor was likely thinking:<br /><br />1) Even though the odds were stacked against them from the start (trading at 2/25 gives this away!), this was an asymmetric return opportunity where you could make multiples of your investment assuming a few things went your way. And its not as if there wasn't a lot of fundamental work done on the assets - cap rates, real estate analysis, etc. - to get them comfortable with the opportunity.<br /><br />2) Because total loss of principal was high, they invested a small portion of their portfolio in the name so they didn't go broke, say 1-2% of capital. And so, like you, they don't feel all that bad losing that even though they're likely disappointed with the outcome.<br /><br />3) Maybe this is not the way you invest but in my opinion that many likely share, there is absolutely a place in a portfolio for positions like this where you will have limited information, where the odds are against you from the very start, and where you may lose all your money, and where you may make a lot of money if your thesis works out. The key is to size these opportunities appropriately, i.e. small.<br /><br />So, congratulations on avoiding a loss. But lets not infer that investors didn't understand the obvious/basic risks that you've mentioned in this article. They did! Investing in distressed situations comes with a lot of risk, especially when you're dealing with the absolute bottom of the cap structure - but if you get your fair share right, the returns will be there.Anonymousnoreply@blogger.com