Friday, January 29, 2010

Modification of Regional Bank Strategy: Sold 100 Wilmington Trust (WL) at $14.13

After reviewing the report for Wilmington Trust (WL) this morning, I realized that I needed to make a modification in my Regional Bank Stocks stratagem. Previously, the strategy called for keeping most of the purchases for at least five years and for no more than 10. The primary exception was that I would sell shares of a bank when I developed a rational concern that the bank was moving toward seizure by the FDIC. This is not the case with Wilmington. This is why I am going to add a second exception, and I will just refer to it as the "Wilmington Exception". This exception will be a bank that suffers what I view as a major and unexpected reversal in its business.

Wilmington Trust missed expectations by 27 cents and reported a 4th quarter loss of 23 cents. Analysts were expecting a four cent profit. Nonaccruing loans are going in the wrong direction, increasing 88.1 million sequentially to 455.6 million as of 12/31/2009. Net charge-offs also increased sequentially by 11.3 million to 33.1 million in the quarter. (See also: No Trust Investors fret)

I may have kept the shares if WL was paying a decent dividend. Like a lot of banks now, the bank is paying a 1 cent per quarter dividend. And, I also sold the shares at a profit, having bought the position in two lots: BOUGHT 30 WL=Lottery Ticket at 9.98 Added to WL 12.36

I will either substitute another bank for Wilmington or increase my exposure in one of the existing holdings.

I sold my 100 shares this morning at $14.13 after there was a brief rally off the earlier low. (see Disclaimer) Shares quickly sunk again and rightfully so in my opinion. Possibly, I may add WL back in the LT category if the price sinks significantly under $10.

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