Tuesday, May 22, 2012

Paulson's Earnings Surprised Somebody

Paulson Capital has been brought up a few times on this site because of how cheaply it has traded relative to its current assets. Last week, shareholders were rewarded. Immediately following the company's earnings announcement, shares almost doubled; as a result, this company becomes the latest stock to move from the Stock Ideas to the Value In Action page.

This result re-enforces a number of lessons value investors should already know:

1) Be patient. This stock went down (and quite a bit!) before it went up. Shareholders who gave up lost out, while those who bought more won.

2) Buy companies at discounts to net current assets (that aren't burning through those assets). Even if their prices go down, you know the company's business value is more than its market cap, which should help you with #1.

3) Do your homework. The company's earnings jump should not have been a surprise. Paulson disclosed a large ownership position in a public company that saw a huge price rise over the quarter, which should have been clear to all.

4) Be nimble. Paulson's shares quickly fell back to within its normal trading range such that investors who didn't sell when they were offered the chance have to wait a little longer.


Anonymous said...

the stock looks down from when it was mentioned as a buy?

Anonymous said...

This is a disappointing post given the quality of this blog.

The uptick was an AON order because I personally have a limit sell which didn't execute.

And it was ONE uptick by an eager buy who bought $25K worth of stock. Nothing to get too irate about if you didn't sell - because you COULDN'T sell.

This stock is highly illiquid and is a good value stock for the long-term holder who will only be able to unlock value when more buyers become interested or when there's a tender offer or merger.

This ain't value in action. It's more like value in inaction with a one-time AON order uptick that nobody could meaningfully participate in.

Let's not pat ourselves on the back for random fluctuations in the stock market.

Saj Karsan said...

Hi Anon1,

It is now, yes! But on May 15th it hit $1.68 per share (compared to today's price of $0.92

Hi Anon2,

I was indeed irate that I didn't sell at $1.68, as I'm always looking to take advantage of those random fluctuations in market prices you refer to. I was able to sell around $1.40 though, and it looks like many shares traded for above that. Thanks for the info; I didn't know that large block at the max price was an AON order.