Case Study: Geoff's Investment in Bancinsurance - 2 Failures and 1 Success160 views 2010-10-03 07:56 Tags: Investment Success Study Case Failures
Two days ago: I wrote about my investment in Bancinsurance (BCIS). My investment was a success in one way and a failure in two ways.
It was a success in terms of return. My cost was $5.82 a share. Bancinsurance’s board agreed to an $8.50 a share buyout. I sold my shares between $8.00 and $8.20, because I saw opportunities elsewhere where good things could happen fast. One example is Barnes & Noble (BKS).
Success #1: That’s a better than 38% return in less than 7 months. If I’d held Bancinsurance through the buyout I would’ve done better with a 46% return in less than 10 months.
So how was my investment in Bancinsurance a failure?
In two ways:
1. I didn’t buy enough stock
2. The board didn’t get a fair buyout price
Failure #1: I only bought 25,000 shares. Some of that was my own clumsiness. I would’ve gotten 35,000 shares if I was a better buyer. My mistake was bad timing. I started buying right before the CEO’s $6 bid was announced. I should’ve started buying in February.
Failure #2: Bancinsurance’s book value was $8.52 a share in March. It’s $9.50 today. $9.50 would’ve been a fair buyout price. The board agreed to $8.50. That cheats shareholders out of 12% in extra returns. It’s not fair. That’s life.
And that’s value investing. You can fail at two things and still make 38% in 7 months as long as you buy at the right price.