WASHINGTON, April 17, 2017 – Our columns were brief to nonexistent last week due to both the shortened Good Friday trading schedule as well as the gyrations of the market itself. Traders exited early for the holiday, generally selling on the way out for fear the North Korean situation could get out of hand over the long weekend.
Things are looking up Monday morning, at least as of 12 p.m. ET, but we’re inclined to keep up our regimen of watchful waiting, given last week’s “Meh” results in our portfolios.
We were genuinely excited about the possibility of landing some shares in last week’s rare bank IPO offering, Cadence Bancorporation (symbol: CADE) of Houston.
SeekingAlpha contributor Don Dion touted it as a potentially good buy, so we put in for a couple hundred shares. When it priced at $20 per share—the midpoint of its expected $19-21 range, we were momentarily a bit dubious. That’s because, as opposed to when this writer was actually in the stock trading biz in the 1980s, in 2017, it seems as if, when an IPO prices up above its expected range, that indicates it’s become a hot issue. So, in this case, CADE was neither hot nor cold.
We decided to follow through anyway, and what do you know? The shares turned out to be kinda, sorta hot. Therefore, as per the usual rule, the rich guys got all the shares, and little guys like this writer got zero, nada, zip.
This tendency still irritates us, though as we’ve explained here before, it’s par for the IPO course.
Since the shares went public last Wednesday, they’ve popped as high as $22.24 per share, but are now settling back a bit in Monday trading, currently sitting at about $21.80 per share as of the noon hour. That’s still up, of course, but then again, bank and financial IPOs, when they actually happen, don’t usually have as much poppage in them as unicorn tech companies generally do.
If this issue actually settles down below its IPO price, we might actually pick some up. In the meantime, it’s on to something else, whatever that might be during a week where stocks seem more worried about North Korea’s latest psycho Kim then they are bothered by the advent of Q1 2017 earnings season, which is upon us.
We’re inclined to just hang around not doing much until investor sentiment decides to show its hand once again. On the other hand, we did lighten up slightly in what’s proved to be a disastrously early over-investment in recovering, Cleveland-based iron ore mining company, Cliffs Industries (CLF).
After some 2-3 years of serial disasters based on Obama’s near-totally successful destruction of the U.S. domestic coal industry, Cliffs dumped its massive domestic and foreign coal mining holdings, paring back to its original emphasis on iron ore. The strategy is proving quite successful at long last, as the company’s previous quarterly numbers amply demonstrated, shooting its shares up past $12 per share in February.
When these shares backed off a bit, we started picking some up little by little, averaging down. We figured that CLF had gotten ahead of itself, so we’d buy in and average down while the stock corrected for the excess irrational exuberance. This turned out to be a mistake, at least short term.
Already heavily shorted, the stock has been taking a horrific nosedive in recent weeks, hitting another new short-term bottom Monday morning at $7.22 per share. It’s now bounced back to around $6.92 per share, which is okay, we guess. Except that the relentless sellers will likely do a mass dump as they usually do, leading up to the market’s 4 p.m. ET close.
With Cliffs’ next quarterly report coming up soon, maybe the sellers know something we don’t know. As a precautionary measure, we’ve peeled back our too-large position in the stock slightly. We hate taking a loss like this when the shares are bound to recover nicely at some point. But since we over-invested in CLF to begin with in our smaller portfolio, we feel we’re forced to adjust for that by selling some shares.
In doing so, we still maintain most of our position, but we’ve reduced its percentage in the over-all portfolio, which, we think, is prudent in light of the current international situation.
If something really goes wrong in East Asia over the next week or two, having a fair amount of cash in our portfolios will enable us to scoop up some good investments at bargain-basement sale prices… assuming, that is, that the murderous delinquent currently running the massive concentration camp known as North Korea doesn’t secretly have a nuclear-tipped ICBM in a secret bunker that’s locked, loaded and aimed at Washington, D.C.
This is headline risk on steroids.