Australian Stock Babcock & Brown Killed

[smwinc 20]

Wow, sucks to be B&B Chief Phil Green. His holding's in B&B were worth around $440 million at the peak in 2007. Currently it stands at around $67 million.

 

Ouch.

 

(Disclaimer, I am now long in stock/CFDs since the close Friday 13th).

 

Personally, I couldn't ignore this as a trade.

 

At 5.25, we should at least test the IPO price (from 4 years ago!) at 7.60, which would be around a 40% gain.

 

You're maximum risk is that the company goes bankrupt (5.25 at the close on Friday).

 

Unless someone is hiding something seriously big (never underestimate that possibility), but I think it's a little unlikely.

 

It's likely there was a severe overreaction as nearly everyone on a margin-loan who owned shares would have been squeezed out once we took out the IPO price from 4 years ago.

 

Worth having a look at. I'll post the updated charts over the next few weeks.

[smwinc 20]

Update:

 

Sold out 80% position on the gap fill, got filled @ 6.90.

 

Why 80%? Magic risk-free number. Assuming 100 shares:

 

100% * 5.25 = (525) - Initial Purchase

75% * 6.9 = +517 - Profit taking.

25% * 0 = +0 - Worst case scenario company goes bankrupt.

Net Result = -7.5

 

At 80%:

100% * 5.25 = (525)

80% * 6.9 = +552

20% * 0 = +0

Net Result = +27.

 

Now in the position where the last 20% can go to zero, and I still come out on top.

 

I don't do many stock trades, but when an opportunity knocks, worth taking I think . .

 

Cheers