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Berkowitz: Deja vu

September 17, 2011 Leave a comment Go to comments

If you read Berkowitz’s interview with OID in 1992 and then watch this interview w/ WealthTrack, similarities are clear. It is amazing how similar the situations are. Although going against the crowd is always difficult in the short-run. Blinding comparing the situation in 1992 to 2011 would be foolish, without looking at what else is happening with companies and global economy, but ignoring the business cycles wouldn’t be smart either.

For disclosure, I’ve recently bought BAC warrants. The prices of the warrants are extremely cheap if you look at what this company can make in a normal business cycle. Also, we have 7 years for this ‘normal’ business cycle to return.

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Categories: Reading
  1. ryan
    September 18, 2011 at 6:44 pm

    very basic question, but how do you go about purchasing the warrants?

    • paras
      September 18, 2011 at 8:15 pm

      You should be able to buy them from any of the online brokers. The symbol for it is different on different brokers, the common ones that i’ve heard are BAC.WS.A and BAC”A. Call your broker and ask them about it.

      Paras

  2. ryan
    September 18, 2011 at 10:01 pm

    Thank you Paras. One more quick question. If you believe that the bank is undervalued why not just by the shares and not the warrants? At current pricing (3.39+13.30=16.69 (assuming no dividends are paid out)) your purchase price is $16.69 versus a current stock price of $7.19. Are you planning to make the money of selling the warrants.

    Any further insight you can share would be greatly appreciated.

    Thanks again!

    • paras
      September 18, 2011 at 10:49 pm

      The upside comes in based on what you expect to happen w/ BAC a few years out. If you believe that BAC can earn about $2.50 – $3/share, then a fair valuation is around $25 – 30/share. So lets say in 5 yrs BAC earns $3/share and the market values it correct at $30/share. If you have $1,000 to invest you can buy the warrants or shares. If you buy the shares at today’s price of $7, you will be able to get 142 shares for your $1k. If the shares get to $30, your shares will be worth $4,260. If you buy the warrants at $3.40, you get 294 warrants. If the shares get to $30/share, then you warrants are worth atleast $4,909 ($30 – $13.3 = $16.7 x 294).

  3. ryan
    September 19, 2011 at 9:04 am

    Thanks you for your explanation!

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