Watch for Opportunity
Posted at 9:40 a.m. EST, Jan. 14, 2009
The opportunities keep knocking, they just knock in strange places. The other day Associated Banc-Corp (ASBC) (a second loser out of Green Bay) priced an offering in the hole, and you made a quick buck if you blinked simply by getting in on a deal meant to appease the regulators.
Today First Midwest Bancorp (FMBI) -- another ne'er-do-well bank, this one from Illinois -- looks to be another quick gainer.
In Getting Back to Even, I stress that this strategy of buying merchandise in the hole, even if you don't like the merchandise, is a dynamite idea, just dynamite.It is counterintuitive to buy anything you don't care for. ASBC and FMBI, like Zions (ZION), are banks that I am not crazy about. But when they raise equity, they go from being a bad story to being a good story. Check the REITs -- names like Federal Realty (FRT), Brandywine (BDN), Boston Properties (BXP), and many of the hotel REITs -- if you don't believe me. Or the huge gains in U.S. Steel (X) after its deal. Other than Federal Realty, I didn't care for any of these deals before the refinancing. After, though, they are terrific. The Wells (WFC)/Bank of America (BAC) bank deals and all of the other secondaries all worked too, including ones like Capital One (COF) that seemed like they shouldn't, given Obama's attack on credit cards. In fact, only Synovus (SNV) was a disaster. So keep an eye on these. They keep happening. Stocks that that are bad before they sell stock and good after. A great pattern. Would I hold ASBC or FMBU after these deals? I like to own the well-managed ones, not the "bad" ones, so I am indifferent after the deals are done. Money is money. I like the quick profits. At the time of publication, Cramer was long Apple and Bank of America.
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