Tuesday, May 28, 2013

Manhattan Bridge To Somewhere

The oldest member of this site's Stock Ideas page is Manhattan Bridge Capital. In the last six months, however, this company has seen its shares rise some 65%! As a result, it becomes the latest stock to move to the Value In Action page.

The basis for investing in this company is pretty simple. The company makes profitable, short-term loans backed by real estate. The company's shares have at times traded for about half of this company's book value, meaning you have been offered the opportunity to buy these loans at a discount. So, I did.

Recently, however, shares have traded much closer to book value. While the company's earnings have been getting stronger, this has been accomplished by jacking up the company's leverage. But I didn't buy this company for its earnings; I bought it for its equity. An increase in leverage increases the risks that the equity is worth substantially less (or more, but I'm only concerned about the "less" part) than book value. As a result, this is where I take my leave.

It's getting harder to find places to put realized gains now. Any suggestions?

Disclosure: No position

1 comment:

Anonymous said...

It is becoming hard to find good investment candidates - for new money and for the money I am freeing up by selling some of my holdings.

I am currently working on National Oilwell Varco and Bouygues. They both look interesting albeit I am hoping from another 10% drop in each case.

Do post when you have a good idea. Thanks for sharing your thoughts in a blog.