Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (50049)	11/14/2012 11:10:59 PM
From: E_K_S	Read Replies (2) \| Respond to of 78748

Gastar Exploration 8.625% Serie (AMEX: GST-PA) - upped position by 20% Armanino Foods of Distinction Inc.(AMNF) - peeled off 20% of position for small gain Magnum Hunter Resources Corpora (MHR-PD) - increased position by 27% Magnum Hunter Resources Corpora (MHR-PC) - decreased position by 33% for small gain Hi Jurgis - I still believe in GST; the quality acreage they own, their producing wells already drilled and those planned for next year, the conservative CapX budget for next year and the possibility of one or more land sale(s), so I added more preferred shares to my losing position. If everything is to be believed in their report, this is a great value play. I can only assume that some large seller is forced to liquidate their position "in size" off loading their preferred position at a loss over the last four trading secession. I confirmed through a 3rd party that the company is not selling any of their authorized shares. From their most recent conference call, the authorized shares left to sell amount to about 77K. Just speculation on my part "The Seller" may be T. Boone Pickens. Because of his recent divorce settlement he may have had to sell some or all of his common and/or preferred holdings. T. Boone through his holding company owns 2% of the common stock and is/was a big stock holder as of Jun 29, 2012 - BP CAPITAL MANAGEMENT, L.P. owned 1.77% of GST common or approx 1,164,777 shares. It's possible he also owns the preferred shares that he could be selling. GST Institutional Ownership In any case, whoever "The Seller" is, presents this value opportunity since such forced liquidation is pricing this paper at an exceptional value price almost 25% below where it was priced before the selling started four days ago. So I peeled off 20% of my AMNF with a nice gain (pays a 4% dividend too) to put into more GSTpA shares (which now yields over 16%). The dividend is a "Return of Capital" which has no tax effect until the stock is actually sold. Therefore, I get a good revenue stream of dividends and I hope the exit strategy will be the sale of the company in 24-36 months. These preferred shares are paid off at PAR (ie $25.00/share) with my lowest cost shares receiving an 85% capital gain kicker. That's the long term reward part. I also have been selling down my MHRpC shares and rolling them into MHRpD as the D's shares fall in price and their yield passes 10%. I decided to buy another chunk of the MHRpD shares at $42.67/share (effective yield of 10.67%) rather than adding to the common shares (for me the risk/reward is better owning the MHRpD shares). However I own both with 25% common and 75% MHRpC & MHRpD shares. I will sell another 1/3 position of the MHRpC shares to pay for these D shares. The MHRpD could be paid off at par $50/share if/when MHR is sold a Capital gain kicker of 18%. I will eventually move the last 1/3 of the MHRpC's into more D shares and/or more of the GSTpA paper. FWIW, MHR and GST own acreage in the Utica shale area w/ wells that produce NG liquids. About 30% of the value in MHR is their pipeline and gathering system which is a vary valuable asset w/ predictable revenue streams that are not subject to changes in the price of NG. Therefore, it is a bit safer from a risk/reward stand point. My positions in MHR (common, MHRpC & MHRpD) and GSTpA combined is 15% of the portfolio so it a rather large bet for me. The position does spin off a generous monthly income stream that is not taxed until one or more of the positions are sold since this is a return of capital. EKS