Takeover Week

 | Nov 11, 2011 | 4:00 PM EST
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This past week has been takeover week for many of my stocks.

Force Protection (FRPT) was finally purchased, as General Dynamics (GD) bought the small defense vehicle contractor. The $5.52-per-share price tag is far less than the company would have gotten had they sold two years ago, but with a decline in defense spending likely, we will take the money and move on.

If you were patient and disciplined buying the stock when it fell to a large discount to book value over the past two years, you have a decent but not spectacular profit.  The spread is very small so I would not try to squeeze the risk arb trade and am just selling the stock here.

McCormick & Schmick's Seafood Restaurants (MSSR) is also being sold for a respectable gain. Buying the stock when it was below book value in 2009 has resulted in a near doubling over the past two years.

My average cost on this over the past three years is right around $6, so, once again, it is a decent but not spectacular gain. Again, the spread is not wide on the deal, and deals involving Landry's Restaurants tend to be an adventure, so I would go ahead and sell my shares here rather than try to milk the last dime out of the stock.

Almost all of our real-estate-related names are down on the year. The mortgage REITs as a group have absorbed the most damage, as U.S. monetary policy is pressuring interest rate spreads and  compressing margins and profits for the group.

The worst performer has been Invesco Mortgage Capital (IVR), which has been too aggressive betting on a recovery in the economy and mortgage markets. The company has seen its book value and stock price drop sharply. It has been investing in deals right alongside WL Ross & Co., the investment firm headed by noted distressed investor Wilbur Ross, and at some point, I think the bet pays off and the shares go up as quickly as they have fallen. I am looking for a favorable place to add to Invesco as well as Annaly Capital Management (NLY), Ellington Financial (EFC) and Chimera Investment (CIM). American Capital Agency (AGNC) is also on my mortgage REIT radar screen right now.

Micron Technology (MU) has seen its stock price drift down once again. The stock is trading well below book value and my fairly conservative estimate of liquidation value.

Computer memory names will struggle next year, as prices will probably decline, but Micron should be able to lower its costs faster than competitors and gain and edge. A pickup in personal computers and continuing strength in smartphones could also help the company reverse the negative trends going into 2012. The company has plenty of cash on hand and should be able to weather the current difficult semiconductor marketplace. I already own some shares in this company and am looking to sell puts to back into more.

On a final note, I believe that we should be closed today in quiet observance of Veterans Day. Since we're not, however, I just want to take this opportunity to thank those who have ever marched, trained, deployed, done KP, stood guard duty or served our nation in the hundreds of other ways in the military.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider FRPT, MSSR and EFC to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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