Over the last couple weeks I reinitiated a position in Community Bank System, Inc (CBU) at an average price of $58.34. I had sold the position back in April of 2019 to raise cash. Community Bank System in currently our 13th largest position at this time.
I had already recently added more on the COVID pullback which made the stock a lot cheaper than it has been in a while. After already adding a lot to my top picks at lower prices and the huge comeback in the market it’s getting harder to find real bargains. I think short-term thinking pullbacks like what happened on Friday can created some good opportunities such as this.
Reason for Opportunity in Community Bank System
Banking and financial stocks have been slow to recover this year and there are still significant bargains in this area, particular with regional banks that are well capitalized, little exposure to risky investments and paying a good dividend like Community Bank System.
I may add more if the price stays around this level depending on other opportunities.
A portion of my position in Hanesbrands Inc. (HBI) and my entire positions in Live Current Media Inc. (LIVC), Micro Focus International plc (MFGP), DXC Technology Company (DXC), Toyota Motor Corporation (TM), L Brands, Inc (LB), (WAB), Hewlett Packard Enterprise Company (HPE), HP Inc. (HPQ), Perspecta Inc. (PRSP), General Electric Company (GE), Community Bank System, Inc. (CBU).
While many of these positions I felt comfortable existing, the main reason was to raise funds. I will most likely rebuild positions in Community Bank System, Inc. (CBU) and add back to Hanesbrands Inc. (HBI) at some point.
I sold some shares recently to reduce my exposure to Merchants Bancshares Inc. It has been a large percentage of my overall portfolio and has become more fairly valued, making the margin of safety low.
I do however still maintain a large position in the company and feel it’s a good investment.
FALLING KNIFE DEFINITION:A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value, such as in the case of company bankruptcy where equity shares become worthless. A falling knife situation can occur because of actual business results (such as a big drop in net earnings) or because of increasingly negative investor sentiment. Source: Investopedia
I do like the falling knives! I usually find the best opportunities in the companies who’s stocks fall hard, some deserve it, but sometimes is unwarranted panic selling. I got many of my current holdings this way. I bought the bulk of my Merchant’s during the last economic crash when all banks were being sold no matter how safe/dull their business practice was. Cisco (CSCO), Keurig Green Mountain (GMCR), GE (GE) Google (GOOG), eBay (EBAY), Apple (AAPL)… I bought my stakes in all of these when people were overly pessimistic on them.
Why Catch Falling Knives?
Often, you will have companies have some bad news, maybe an earning or sales miss, an unexpected one time expense… temporary problems even though the company’s business is sound, the stock will drop hard. This makes for a great opportunity.
Some of the ones I’m looking to buy now are Staples (SPLS), Merchant’s Bank (MBVT), 3D Systems (DDD), Stratasys (SSYS), Amazon (AMZN), AT&T (T), Verizon (VZ), Sierra Wireless (SWIR) – either for the fact that they have fallen a bit, but still have sound fundamentals based on the current price or have decent dividends which help keep a floor on further downward pressure with great potential for upside.
But generally right now I’m putting together a nice list of potential ideas while keeping a wait and see attitude, waiting for the right time to strike.
MBVT is one that I’ve consistently held a core position while trading around it. I like it at $28.50 or less usually. At the last stockholder’s meeting (which I still need to post my write up on) they mentioned they are in the process of completely upgrading their computer system which will increase efficiency, customer service and lower overall cost. However, the whole cost of this upgrade is expensed this year so it could scare people (which it looks like is already happening) that just look at the numbers… could create a nice opportunity there.
The recent stock market drops are a good thing for the overall market. I think the recovery has been too fast and based somewhat too much on the fed temporary easing… it has to end sometime.
It’s about time for the markets to show strength on their own merits.
Some smaller pullbacks now are better than another much larger crash later in the year. Consider the pullbacks now as a good opportunity to sell some positions where the current price is high compare to the value of the business and make some buys of stocks that are selling at a discount.
There’s usually always some good deals in the market and they often become better deals when the overall market is going down hard. Make of list of companies that look attractive and judge them based on their current and future business prospects compared to the current price.
I’ve already started too and plan to buy more if prices continue to go down more.
If you’re still nervous, consider investing in solid companies with reliable dividends. For example, I like Merchant’s Bank (MBVT) with an over 4% dividend. They are rock solid and have consistently paid a dividend for years. Worst case scenario the stock plummets and I still get my 4% on my original investment and plus I get to buy more for a larger dividend.
Other stocks with decent dividends are Intel (INTC), Cisco (CSCO), Microsoft (MSFT) and GE (GE). All of which I have current long positions in.
