The Prudent Investor


Fifth WL Purchase
March 7, 2008, 9:43 am
Filed under: Financial, Update

Last week I realized that I had not funded my account and only had enough money to purchase two shares of WL. Today I saw that the account was funded, so I purchased four shares of WL at $29.61. This completes the initial purchase of WL. I will probably buy more over the next few months, not only to bring the position closer to the level of the other three, but also because I expect to see banks continue to struggle over the short haul. Since these are long term positions, making purchases at this point are the right strategy to follow.



Fourth WL Purchase
February 28, 2008, 10:23 am
Filed under: Financial, Update

Purchased 2 shares of WL at $32.23 per share. Why not 3 shares? I forgot to fund my account and did not have enough. <g> I will purchase 4 shares next week to complete the initial position.



Third WL Purchase
February 21, 2008, 1:35 pm
Filed under: Financial, Update

Purchased 3 shares of WL at $32.32 per share.



Second WL Purchase
February 14, 2008, 10:23 am
Filed under: Financial, Update

Purchased 3 shares of WL at $33.07 per share.



First WL Purchase
February 7, 2008, 10:15 am
Filed under: Financial, Update

Purchased 3 shares of WL at $32.69. Check the progress of the portfolio via the “The Prudent Investor Portfolio” link on the left.



A Decision
February 6, 2008, 7:26 am
Filed under: Financial

Looking at the three final companies in contention – Associated Banc-Corp (Nasdaq: ASBC), Wilmington Trust Corporation (NYSE: WL), and BB&T Corp. (NYSE: BBT) – shows a number of similarities.

  PE P/S Yield Market Cap
BBT 12.93 3.76 4.33 3.66B
ASBC 13.32 3.19 3.85 2.37B
WL 11.60 3.20 4.97 20.02B

The only thing that sticks out here is that Wilmington Trust has a much larger market capitalization than the other two. However, a closer look shows that they also have the lowest P/E, almost the lowest P/S (statistically insignificant), and the highest yield. Unless I can find something damning about this company, it could be the best of the three. However, before I get too far ahead of myself, let’s look at a description of the company.

Wilmington Trust Corporation operates as the holding company for Wilmington Trust Company that provides fiduciary, wealth management, investment advisory, financial planning, insurance, broker-dealer, lending, and deposit-taking services in the United States and internationally.

The Regional Banking segment offers various commercial banking services, including commercial loans, construction loans, and commercial mortgages; and retail banking services comprising consumer lending, residential mortgage lending, and deposit products, such as demand checking, certificates of deposit, NOW accounts, and savings and money market accounts in Delaware.

The Corporate Client Services segment offers various capital markets services, including owner trustee, indenture trustee, and other specialized services for capital markets transactions; entity management services consisting of independent directors, office space, administrative services, and corporate governance services to special purpose entities and captive insurance companies; retirement services that include trustee and administrative services for 401(k) and other types of retirement plans; and investment and cash management services.

The Wealth Advisory Services segment provides asset management services; family office services comprising family governance planning, investment consulting, real estate acquisition and disposition, cash flow management and budgeting, tax planning and compliance, risk assessment, insurance oversight, family security, bill payment, and payroll management services; and fiduciary services, which include trust, administrative, tax, philanthropic, and estate settlement services.

Now that we know what they do, we can look at the 2007 Q4 conference call. I do like the way Ted Cecala, the company’s CEO, began his portion of the call.

“If we had lending relationships with national builders for loans financing residential construction in Florida, Arizona, Nevada or the Midwest, I would discuss that; but we have none.

“If we have exposure to structured investment vehicles, I would begin my discussion by describing how we are valuing those assets; but we have none.

“If we had assets backed by sub-prime mortgages, I would also discuss them; but we have none.”

You can find this at www.SeekingAlpha.com and read how a couple of analysts raked them a bit over the coals, and this is reflected in the fact that they generally have a “Hold” on the stock. However, they do not appear to have exposure in the areas that have given the economy a hard time recently, so this gives me hope that this company has been unfairly knocked down.

Analysts have not recently given WL a favorable rating because the diluted earnings of 67 cents was five cents short of their estimate. I believe that we are back to realistic expectations and as the industry begins its recovery, Wilmington Trust will do just fine.

I believe that Wilmington Trust Corporation will be the next addition to the Prudent Investor portfolio.

In the past I have started each position with a $500 purchase, but since the trades are without commission, I am going to make a $125 purchase each Thursday of this month. That will help mitigate some of the risk due to the potentially volatile nature of the industry at the moment.  I will not be surprised to see financials continue to have a hard time, but do think that it is proper to start the position at this point.



Cutting Some Financial Institutions
February 4, 2008, 2:03 pm
Filed under: Financial

When I started putting this together my intention was to look through the financials and determine which financial company might be the best performer. That’s the typical way I go about things, but I decided to do things a little differently in this situation.

Problems with the economy started with the whole subprime mess, and all financial institutions began their big decline. Those with the highest exposure fell the hardest, so it seems to me that the easiest way to weed these losers out would be to look at the 52 week high and low and see how far each had declined. Those that had fallen the hardest would probably be the ones who must have relied on subprime issues the heaviest.

As the market tends to overreact and then correct, the companies that recovered better would be the ones of greatest interest. The whole group got severely knocked down, and the ones that shouldn’t have been grouped with the whole are in the process of correcting more quickly.

So below is the chart I put together at the beginning of the month. The first column is the 52 week high, the next is the 52 week low, the third is the percentage of the high the low represented (the higher the better), the next column is a grab of the current price, and the last column indicates the percentage recovery (the higher the better).

  L H % Cur R%
SNV $10.35 $33.82 0.31 $13.30 0.13
MI $20.92 $51.48 0.41 $28.45 0.25
RF $17.90 $37.61 0.48 $25.40 0.38
CMA $35.01 $63.89 0.55 $44.35 0.32
BBT $25.92 $44.19 0.59 $36.27 0.57
ASBC $21.38 $35.46 0.60 $28.56 0.51
WL $27.78 $44.55 0.62 $35.16 0.44

The four companies with the biggest 52-week drop are also the companies with the slowest recovery. These companies will be removed from consideration. The remaining companies each dropped about 60% and recovered about half of the decline. So here is a list of the final contenders.

Associated Banc-Corp (Nasdaq: ASBC)
Wilmington Trust Corporation (NYSE: WL)
BB&T Corp. (NYSE: BBT)