When my shares of HGIC were bought out in 2011 I was looking for another P&C play. Instead of AFL (which I regret), I decided on a more speculative play, TWGP.
I added this company early last year and it’s been one of the most speculative positions I own.
I have been dreading this post but I try to keep my readers up-to-date on all my trades, good or bad. So far this one has been pretty ugly.
Back on Nov. 3 2012 I added some shares after deciding that the storms in the northeast wouldn’t have as much of an impact as everyone thought. That post can be found here.
Since then, TWGP has hit a yearly high of $22.30 and a yearly low of $6.58. They were over $20/share as recent as August. Yes, that’s a huge range!
TWGP went through a merger with Canopius Bermuda, a reinsurer. TWGP also understated its reserves and delayed their financial statement. This happened on September 17th. They are due to report their 2nd quarter results now the week of Oct. 7th, next week.
The CEO also was required to liquidate over 1 million shares due to an agreement with another financial institution. This added more fuel to the fire.
One of the biggest risks is a possible downgrade of their AM Best rating. There should be a big movement one way or another next week when earnings are reported.
Shares of TWGP have plummeted and have just recently started to climb a small % back up. Here’s a look at their chart and the volume below.
Here’s some recent trades with TWGP:
08/29/13 – BTC 1 TWGP Oct 19 ’14 $20 Put @ $6.50
08/29/13 – Sold 1 TWGP Apr 19 ’14 $17.50 Put @ $4.40
09/18/13 – Bought 200 shares TWGP @ $10.11
09/23/13 – BTC 1 Apr 19 ’14 $17.50 Put @ $9.50
09/27/13 – Sold 4 TWGP Apr 19 ’14 $7.50 Put @ $1.75
10/01/13 – Bought 274 Shares of TWGP @ $7.34
I have rolled puts out and averaged down on shares. I know this looks a little messy and this is probably the perfect scenario of trying to “catch a falling knife” but if this company doesn’t go out of business (which I don’t think they will) then current prices are going to look cheap in a couple of years.
My only realized loss is $860 from buying back puts. However, if TWGP is trading above $7.50 next April I will look to collect $750 in premiums.
I’m sitting at a cost basis of 12.34/share with 840 shares. Current yield is over 8% and shares are down 37% from my cost.
However, I’m done adding more money to this company. I’ve already assumed a lot of risk.
This is not a typical purchase but I don’t mind adding a little risk sometimes to my portfolio. This stock is certainly not for the faint of heart.