Hi Carl Worth - You state:"...do you ever think of foregoing the call premium on the idea of a potential buyout, or do you think that a buyout is rather unlikely?..."
Absolutely! It's much harder to take the call premium now since the potential for a few quarters of positive earnings growth and the eventual "Buy Out" offer will happen. The question is when and how much.
I am playing this using an option straddle strategy (http://en.wikipedia.org/wiki/Straddle). Otherwise, just be patient, accumulate shares and wait for the company to report a few quarters of positive earnings. The company is in a transition quarter. If we get a positive yield curve and NYB can grow their base deposits, then your in the cat bird seat.
If the yield curve remains negative, the company stumbles and cuts their dividend, there will be a buying opportunity.
They do have a franchise that Washington Mutual, J.P. Morgan and Citicorp would love to have. I believe NYB will eventually be bought out. The premium for a buy out is generally at a 20% premium to the current market price. I believe once management can show positive earnings growth again, then a $21-$24 buy out target is reasonable. Acquiring stock at current prices could be a value proposition that provides for a good return. The big question is if management would take a $22.00/share price. My answer is no! Watch the insider BUYs. If they continue to be positive, exercise their options and HOLD their shares OR buy new shares at the market, then a deal may be in place.
IMO at $16.13/share and they continue to pay their dividend (6.00% yield) there is a reasonable value to buy and hold.
EKS
P.S I have been wrong before like betting on Saint Louis to win Game 2 of the World Series....but one game does not make the series,...It's the total of all seven games played. |
