I made some changes to my portfolio today.  I sold the holdings in Munich Re and FBD Holdings.  Munich Re went because I can't really think of a good reason to own it.  It has failed to earn good returns on equity for years, and I don't see any particular prospect of it doing so in the future.  Further, I read a lot of stories about capital flooding into reinsurance from hedge funds, and from buyers of catastrophe bonds.  Two of the benchmarks that I think about when evaluating a stock are "does it have the potential to double in three years" or "is it an outstanding business that I could own forever"?  I don't think it fills either of these criteria, and it's made me some money, so it had to go.
FBD was a much trickier one.  It appears to be an outstanding business and, if I can convince myself it can steadily gain market share, as it has done, I'm sure it will make great returns over the very long term.  I sold this one simply to free up capital to allow me to buy Commerzbank with the knowledge that it's had a good run, and I can rebuy at a later date.
So ... Commerzbank.  Why?  And why didn't I pull the trigger a month ago when it was 30% cheaper?  I've got no excuse for that, I was indecisive, and greedy to see if Munich RE and FBD would squeeze a little higher.  Stupid.  Regardless, if my thesis is correct, Commerzbank is still cheap.  It's a fundamental part of the German economy, is trading at 0.4 P/B, and is repaying state assistance.  We've seen this story before.  Sure, the assets may not have been written down enough in the first place, which makes them harder to exit at a profit.  And sure, there is some real dross in there, and long dated dross at that.  But I'm now comfortable owning this stock for 5-10 years, and I'm very confident that over that time period, the range of potential outcomes are pretty good.  The risk of permanent capital loss is negligible, IMHO.
The final thing I wanted to touch on is Imtech.  What a disaster.  Probably my worst trade ever, if we exclude my attempt to use student loan money to buy into the lastiminute.com IPO.  At least I didn't know better then.  In short, I was arrogant and felt that my analysis of Imtech's finances and prospects was better than the market, which included a range of value based hedge funds, shorting the stock.  I didn't take account of the company's exposure to the economy, and the ability of its revenues to collapse.  I also looked too much to P/E, and ignored the fact that it wasn't very cheap on an EV/EBIT basis.  It will spend the next couple of years paying down debt, so FCFE will be zero at least until 2015.  I'm left owning a stock that I don't particularly want, and I have a paper loss.  I will hold, and wait for the accounts and company to normalise, and hope that the improving EU and UK economy feeds through to Imtech's numbers.  In addition, one could make an argument that it's not expensive relative to the market.  But the fact is that by owning this stock for six months, I am taking an opportunity away from a better stock to be part of my portfolio.  I look forward to next week's numbers with interest.