CUT JUNIORS

Juniors

I dumped a couple of speculative juniors today. The decline just became unbearable. Moreover, my energy exposure continues on the high even with this reduction. I am not too proud of these picks as they were all brought at their peak.

PMI

I opened a small position on PMI (37) today. The stock is undervalued currently (10XE05, 9XE06, 1.1XBV). In addition to the overall market, there are concerns with housing market, accounting issues in the mortgage insurance industry, and slower growth going forward. All concerns are valid, but the selling might be over-done. At this level, it is traded at 1.1 times of its book value and under its estimated 2005 BV of 38. I believe the down side risk should be limited. The company is purchasing a lot of its stocks in 2004 and another $100 million scheduled for 2005. It is more diversified that most of its peers as a good portion of its business are from international operations, which grows at 40% a clip. The overall market appears to be rolling over today, but PMI is trading rather well. My only concern is that my financial exposure has increased recently. Given the raising interest rate, it might not be a good thing. My target is 45 (21%) by the end of this year. I would like to limit its downside risk to 7-8% (34.5). The company is rather liquid, I believe it would be save to put a stop loss at 34.5 level.