12/02/2011 Hughes Market Letter:
Wow, what a two months it’s been. First MUR ($60) up 40%-50%. We sold half at $60, since it became 65% of all monies, and we still own a ton, each time it goes under $50, we add, period.
FMER ($15) up 40%. We are out for now today on a strong day.
IBKC ($50) went up 25%. We are out for now.
KFFG ($12) and CFFI didn’t move at all. We keep adding. CFFI ($22) it is now 20% off all monies, and growing. They raised their cash dividend almost 5% yield now, their P/E is 6 and going lower. They are in a sweet spot like no other bank we know, and have the #1 deposit market share in their market. They trade at 75% of book, does not make sense, buy now.
They also bought back 10% of their stock in 2005 at $41 or so, when their book was $20. Now that their book is almost $30, and the bank is twice as big now and making more money, we believe the next step is a 15% Dutch tender at $35, a 20% buyback, or a sale. Any way, you win. They can do this once they pay back Tarp in early January. They paid $10 million back already and have to pay the other $10 million which will be soon. . Either way, in a month, it will move big time, almost no downside risk at these levels. The stock does not move with the overall market, so if the Dow happens to go down 2,000 points, it should not move. We saw this when it did not move with the 2,000 point swing the past few months. Trades plenty to get a large position, just the best idea we have had in years!
OPY under $13, we are now all in, worth $45+ or zero, I guess, if the banks all crash. Risk reward good, 15% of all monies, 3.5% yield, trades plenty lately.
RDC ($35) up huge, but as most other stocks we didn’t mention this month. Hold them, they are still cheap even with the huge rise.
CRRB ($2.40) a smaller bank in MD, worth a shot, not much volume, buy slow and make 3% of funds if you like risk. Could triple one day.
CFFI, did I mention downside 10%, upside 150%, enough said. Buy it today, do not wait if you want to get rich.
Also, keep a few 60 March calls on MUR, on down days under 50 buy them, a deal should still happen soon at $80+.
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Hughes Market Letter
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