Friday, June 22, 2007

How I made a small profit on Kaiser Group Holdings

As it turns out, I did make a small profit on the busted Kaiser Group Holdings deal. This afternoon I sold my 19 shares for $28 a share and netted a $4.59 profit. After commissions, I would have lost $23.83 if I'd bought the S&P 500. (Not counting commissions, I would have broken even on the index, but that's not cricket.)

Besides luck, which is the overwhelming reason I made a profit, I credit this result to waiting for a good price before buying and not panicking before selling. If I'd sold immediately, I would have been out almost the cost of two commissions. On an annualized basis, my return was 6.69%, which is nothing to write home about, but better than if it had stayed in cash. Remember that these short-term deals are intended to beat the rate I earn in my sweep account.

More importantly, I've kept my streak of profitable closed positions alive. (That a joke, actually. I got lucky on a bad decision. Sometimes, it's best to sell a bad decision at a loss.)


Anonymous said...

I probably bought your shares at $28. KGHI has $36 cash, a litigation option on a further $15 per share, low burn rate, and some nickle and dime liabilities. The fact that they are pursuing "strategic opportunities" is a wildcard. I'd rather they pay a large dividend. Anyway we'll see how it works out.

Jon Ericson said...

This illustrates one of the failings of efficient market theories. I never did look closely enough at Kaiser Group to know if it was a worthwhile investment apart from the going-private transaction. No doubt you are correct. I wanted to sell immediately, even at a small loss, because I wasn't willing to evaluate the company itself and wait for the price to approach the value of the stock. I imagine this happens fairly often. (But I hope I'm on your side of the trade for my core holdings.)

Good luck to you.