Small Portfolio Shakeup to Take Advantage of an Opportunity in Jernigan Capital (JCAP)

It was an interesting day for me, one in which I almost felt like a trader again...and that is not a good thing. But today did remind me how important it is to set price alerts on company's you own and are watching so that you do not have to be glued to your screen, yet you will be "in the know" when a price alert is triggered. It was also the kind of day that reinforced the lesson not to be emotionally glued to an investment, and to remain nimble and flexible when opportunities present themselves. 

So what transpired?

Early in the day I received an alert that Jernigan Capital (JCAP) was trading under $12/share. I quickly learned that an analyst was out with a note to sell JCAP and slapped a $10 price target on the stock. I knew something wasn't right with this as just yesterday the company announced an investment and JV with Heitman, a major player in global real estate. This was a relief as just a few days prior the company released a filing stating the company may have to file their 10-K late as the Heitman deal had not closed according to plan as of yet. Well, it turns out it never was in jeopardy, but the company was just waiting on one final signature for execution. Once it received, it immediately filed the 10-K. 

After significantly buying shares in JCAP this morning around $12/share, I jumped on the phone with Management in the afternoon. The bottom line is that the analyst report was incredibly poorly written and made many false assumptions and conclusions about the Heitman deal that were not based on the actual facts of the deal. Poor assumptions made by the analyst, based on pure speculation and not fact, moved the stock down over 15%, led to a remarkable opportunity, in my opinion, to pick up shares in JCAP at a fantastic price. Will the stock fall more...who knows? But I know I got a great deal today and in the long-term I will be very happy with this purchase.

With a 10% yield and significant "Equity Kickers" baked into its development deals (read my investment thesis for further details on this), JCAP has a very unique business model that should allow for significant investor returns in the years ahead. There are concerns about liquidity drying up, thus future deals in peril, but I do not share in these concerns. With $44M cash on the balance sheet and a significant term loan expected to close in late April, coupled with a robust $600M pipeline of potential deals, I have no doubt that Dean Jernigan and his team will deliver results.

You can check out JCAP's recent press releases by clicking here to learn more about the business.

The hard part of taking advantage of such an opportunity is coming up with the capital to do it. I ended up selling Memex (OEE.V) for a nice gain of 80%+ in order to raise the cash to significantly increase my position in JCAP. Memex is a company I like a lot and one I will continue to follow and likely invest in again in the future, but I have learned over time to not become emotionally attached to your investments or else you can struggle staying nimble and reacting when opportunities present themselves. By selling Memex I was able to lock in on a nice gain and invest in one hell of an opportunity in JCAP. I shouldn't regret that one bit. 

Note: One thing you will learn about me as you continue to follow my content is that my largest positions are the ones I am more likely to hang onto to try to achieve many multiples on my capital. The smaller positions are nice supplements to my portfolio, but they will be where I look to first when I need to raise some cash.