On BOFI

On BOFI

While some members of the board were annoyed with me for “changing your mind back and forth” about BOFI, and “trading” in and out, what I was actually doing wasn’t trading, but trying to decide what to do about a LONG-TERM position in BOFI, that I had already held for three years, in the face of contradictory and ambiguous information, which, unfortunately, wasn’t helped by some of the company’s impulsive actions. (Wow, that was all one sentence). I did change my mind while I was trying to figure it out. Several times! It wasn’t easy. I finally decided over the weekend to go back in with a smaller position than I had had before, which I did on Monday and then Tuesday morning. Imagine my surprise when I saw it up $10 from Tues morning when I looked again Tues afternoon.

I now have a 4.1% position.

But look, that was just luck. I wasn’t trying to “trade”. I wasn’t selling out of a large, long-term position to try to buy it back cheaper! That would be insane! I was scared by developments, then disturbed by the CEO’s emotional and poorly considered remarks in the conference call, then by their changing the transcript of their conference call, and the whole folderol. It’s nice that I got back in a great deal cheaper than I sold, but that wasn’t the point. The point was to protect myself until the storm cleared a bit and I could see what was happening. I would have been happy to buy back at the price I sold, or $5 higher if it came to that. And right now, I’m willing to risk 4%, but not willing to go back to a 10% or 12% position. That may change in the future, as the air clears (or doesn’t).

But this is why you can’t try to mirror what I’m doing. I’m a moving target. Please DO look at the companies that I’m in and investigate them, and if YOU like them, go ahead and invest in them, but because YOU like them, not because I have a position in them.

Best,

Saul

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Welcome back Saul! I finished adding to my position at 83.97. I figured that the CEO was leaving himself wide open to civil and possibly criminal lawsuits with his comments in response to the internal auditor’s charges.
Yesterday was fun;at one time BOFI was up about $12.00. There was nice support at the 50wma and the pierce of the 200 dma was only a 1 day affair. Luck to us all.

Rob
Long BOFI

Pardon, too early for me. The technicals were for ABMD which I filled my position in. I did finish my BOFI position at the number I cited.

Rob

As expected, the recovery has the short sellers releasing BOFI FUD (Fear, Uncertainty, and Doubt) articles on Seeking Alpha this morning.

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Saul, first, thank you for keeping us all informed when you don’t owe us anything and you don’t have to.

Second, I am feeling quite good of myself. I mirrored your position moves. BUT, I made my moves BEFORE you announced yours, and I did it in both circumstances.

Thanks again for all that you do.

Best,
–Kevin

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FYI - From SA this AM (11/4). Title: Buyer Beware: BOFI Related Party Loans.

http://seekingalpha.com/article/3641526-buyer-beware-bofi-re…

Briefly, Jumbo loans (some over $1M) to bank officers and BOD members at apx rate of 1% and LTV ratios in the 80% range. The difference between market rate and related party rate is supposed to be accounted for as compensation, however none of the borrowers have these loans entered as additional compensation.

The author is reluctant to actually assert a regulatory violation. He does however encourage investors to perform their own due diligence.

I figured you’d buy back in when it dropped even further to the 80s.

I never agreed with all the fuss over the transcript issues, and when it dropped further to the 80s I rued my trigger-finger in buying too much too soon. I sold some of my more stable stocks to take on a full BOFI position at the £100-120 range. D’oh

I’m aware BOFI isn’t out of the woods just yet, but good to know you’re back in anyways. Fingers crossed in a few years that trigger-finger of mine will be largely irrelevant (in a positive way as BOFI will be worth x times more now, not $0).

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Saul:

I thought it was the end but with this you got me asking again! This is not intended to be ‘mocking’, or ‘edgy’ or ‘irreverent’ etc…no.
I get loud and clear that your intention was not to trade this stock and to try to get back in at lower price. That would be insane like you said. I get that you were trying to make a decision going forward for the long term based on quite contradictory information swirling around.
But since you went 100% out last week, why go back in so fast? Why not go in more progressively or wait a little bit (a few months or a quarter or two or longer) before going back in to be more certain that your doubts get cleared?
I think you still believe that BOFI has a lot of upside. Your back-and-forth does show your prudence in some sense, and that you are torn by the contradictions around BOFI.

tj

Why not look at it this way.

First, confident enough in the companies prospects with regard to risk at a 20% stake at whatever price it was then.

Not confident at all with new info and the risk with a 15% stake when the decline started

Confident to take the risk and take a 4% stake now that more info has come out and the price is lower

A lot of material info has changed very fast so it makes a lot of sense that someone who has researched the company quite a bit will make these decisions quickly, especially when the stock price, and by extension, the risk, has changed as much as the available information.

Sometimes I think too much weight gets placed on never selling. Burying your head in the sand to buy and hope is not always the best idea. Even if you buy the best company at a bad price it can turn out to be a terrible investment. Active management of a portfolio is not the worst thing ever, and for the reason of so many questions it makes sense that Saul doesn’t want to post every buy and sell on a free board.

Ok, rant over

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Agree with iAmMikesUserName. You must factor in the size of the position, the current price, etc. Risk versus reward. If the price goes down (independent of any other factors), the risk goes down and reward goes up. If the CEO talks, risk may go up or down, depending on what he says and how he says it. A negative SeekingAlpha article comes out, if it’s credible, the risk may go up but if the price goes down then maybe it evens out.

Going from 0% to 4% portfolio share with a stock that used to be 20% is not that big of a move. Saul is not afraid to act on his thoughts at any one time knowing that he can always buy back or sell. If he had simply not done anything until today, then said the uncertainty of the events in the past month cut his confidence so he sold 75%, would anyone really be surprised?

It’s reasonable to want to try to understand the thought process, but in a situation like this I’m not sure it’s worth the effort. I doubt that the thought process can really be applied to any other future situation.

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why go back in so fast? Why not go in more progressively

Hi tj, It feels to me that I did go in progressively. At one time I had a 16% position. I only bought a quarter of it back. That seems much more prudent to me than taking it all back quickly, but on the other hand, in spite of the CEO’s flakiness in the conference call, the business itself is obviously doing very well and I thought it warranted a quarter, at least, of my previous position.

Hope that helps,

Saul

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Why not look at it this way.

First, confident enough in the companies prospects with regard to risk at a 20% stake at whatever price it was then.
Not confident at all with new info and the risk with a 15% stake when the decline started
Confident to take the risk and take a 4% stake now that more info has come out and the price is lower

A lot of material info has changed very fast so it makes a lot of sense that someone who has researched the company quite a bit will make these decisions quickly, especially when the stock price, and by extension, the risk, has changed as much as the available information.

Great, Mike. Thanks. You answered it just the way I should have.
Saul

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Agree with iAmMikesUserName. You must factor in the size of the position, the current price, etc. Risk versus reward. If the price goes down (independent of any other factors), the risk goes down and reward goes up. If the CEO talks, risk may go up or down, depending on what he says and how he says it. A negative SeekingAlpha article comes out, if it’s credible, the risk may go up but if the price goes down then maybe it evens out.

Going from 0% to 4% portfolio share with a stock that used to be 20% is not that big of a move. Saul is not afraid to act on his thoughts at any one time knowing that he can always buy back or sell. If he had simply not done anything until today, then said the uncertainty of the events in the past month cut his confidence so he sold 75%, would anyone really be surprised?

It’s reasonable to want to try to understand the thought process, but in a situation like this I’m not sure it’s worth the effort. I doubt that the thought process can really be applied to any other future situation.

Hi IRDoc, I like your answer too. Thanks.

Saul

But since you went 100% out last week, why go back in so fast? Why not go in more progressively or wait a little bit (a few months or a quarter or two or longer) before going back in to be more certain that your doubts get cleared?

Hi again tj. I’ve been thinking more about your questions. I think what you are missing is that reevaluation is a key part of investing. If you could buy a stock and put it away forever that would be wonderful, but that only works with a tiny sliver of stocks. You have to consider that BOFI was a VERY high conviction stock for a lot of people, not too long ago. For example, I wrote this in my year end summary in January:

…this is a very high conviction stock for me, which is my largest position and which makes up 14.5% of my portfolio…

And Tom Engle wrote this last December:

I own them and plan on keeping them for the extreme long-term, which for me means that these shares will likely be inherited…I never liked investing in bank stocks. I feel even the strongest of them suffer during recessions, but BOFI has such a strong loan growth with excellent loan discipline that I believe they will do much better than the average bank even during recessions. This one could be my next superstock. I am very happy I invested in it.

That’s very high conviction.

And Fletch had always loved them and wrote great quarterly reviews.

Now when a stock like that runs into all this mud slinging, it provokes a lot of anxiety and reevaluation. We may all still like it (I don’t know that for a fact), but it can’t be the same conviction as it was when it was all all pristine and unsullied. And people go back and forth as they are reevaluating, as more and more information, pro and con, comes in. I decided that for now, 4% is plenty for me until the smoke clears. That I bought it back $25-$30 cheaper than I sold it was incidental. If I decide to increase my position it will probably be at higher prices than today’s price (which is very cheap because of all the uncertainty) because the price will probably reflect the good news which made me feel more confident about buying more. If I sell out, it will probably have to be at a lower price.

Best,

Saul

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But this is why you can’t try to mirror what I’m doing. I’m a moving target. Please DO look at the companies that I’m in and investigate them, and if YOU like them, go ahead and invest in them, but because YOU like them, not because I have a position in them.

Saul

Saul is saying the same thing that some of the best investors and speculators have said, “don’t invest on tips.” One very important considerations is that the source of the tip is not obliged to tell you when he changes his mind. If you don’t know why you invested you are up the creek without a paddle.

Please don’t misunderstand me, I’m not calling Saul a tipster but some board members might be using him as such. Saul has clearly stated that he is not an investment advisor. Such an advisor would be obliged to help you buying and selling. Saul is not making such a commitment. Think of Saul’s posts as a stream of conscience rant on investing.

I discovered that Saul and I have very different approaches to the market which is why I now mostly just lurk here once in a while. Please take Saul’s advice, do your own research and reach your own conclusions. Don’t use Saul as a tipster.

Denny Schlesinger

Stream of consciousness

Unedited, spontaneous live or recorded performances, as in film, music, and dramatic and comic monologues, intended to recreate the raw experience of the person portrayed or the performer

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