As a portfolio update, I sold my position in Hudson City Bancorp (HCBK). The reason is that they agreed to be acquired by M&T Bank, so their stock priced jumped 15% in a day to go near the buy price.
It was a decent end to this investment, but overall, this ended up being the worst portfolio holding so far on Dividend Monk. There have only been two positions I’ve been somewhat dissatisfied with, and this was one of them.
The best holdings in the portfolio over the 2.5 year run have been Brookfield Infrastructure and Harleysville Group (which was bought for a very large premium). The two worst have been Hudson City Bancorp and National Presto. Fortunately, Brookfield and Harleysville Group were positions that were several times larger than these other two.
HCBK stayed strong through the recession because they stuck to good loan principles, but ultimately, their interest spread became too small. Government Sponsored Enterprises, that can lose billions and stay in business, began competing in their jumbo loan space where they had not previously competed (which was the main factor that I didn’t consider). They had to do a big balance sheet restructuring and cut their dividend in half. At that point, the stock fell considerably, and I had to re-assess whether it would be good to sell the position or not in the face of that permanent loss of capital. This was months ago.
I decided that, although it was previously an investing mistake, the current holding value was sound, so I kept the position. This second decision ended up being correct.
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