Sold Comerica Bank Two Hours Later
One of the advantages of value investing utilizing pools of similar stocks from a single industry is that every now and then, like once a decade, a unique opportunity will present itself to take advantage of the knowledge and hard financial analysis work one does. In this case, it happened today. Comerica Bank experienced a roller coaster price drop and recovery in one day. It’s intrinsic value was calculated to be greater than $50 per share and the price dropped this morning to just below $30 per share.
The Fund did not have a buy order for this particular security; but, around 10:30 the Fund Facilitator looked online at the banking pool of securities and noticed a dramatic downward price drop with Comerica. Prior experience with this company and keeping track of its financial status created an opportunity. It was decided at that moment that $30 was the trigger point; if the stock fell below this price, a buy would occur. Because the stock is worth at least $50 per share, it would most likely recover pretty quickly. The Facilitator’s thinking was two to three months. It happened in less than two hours!
At 11:43 AM, the price recovered to $50 (hit $50.85 at 11:47 AM) and the sale of this security was triggered. Here are the results of today’s activity.
Market Purchase Price 1,200 shares at $29.99 each $35,988
Cost of transaction at $1.00 each 1,200
Cost to utilize Margin Account 1,200
Total Purchase Price $38,388
Net Sales Price:
Market Sale’s Price @$50/each $60,000
Less: Costs to Trade @$1/each (1,200)
Net Return $58,800
Gain on Sale of Comerica Bank $20,412
Return on the investment: 53%
Annualized Return: Unmeasurable due to the time involved.
Act on Knowledge.
© 2023, David J Hoare MSA. All rights reserved.