Gramercy Capital is an integrated commercial real estate finance and property investment company that completed its initial public offering in August ‘04. The Company’s commercial real estate finance business focuses on the direct origination and acquisition of whole loans, bridge loans, subordinate interests in whole loans, mezzanine loans, preferred equity, commercial mortgage-backed securities, or CMBS, and other real estate related securities. Their property investment business focuses on the acquisition and management of commercial properties net leased mainly to regulated financial institutions and affiliated users throughout the United States. The chief investment strategy is to acquire, operate and selectively dispose of commercial properties leased to investment-grade financial services companies for the purpose of generating stable earnings, depreciation expense to shield from taxes and distribution requirements other earnings of the Company, and the potential for long-term capital appreciation in the value of the underlying real estate, according to MarketWatch.
After a difficult 2009, the company began leaped into the black, turning an estimated $509 million “full-year” loss into $14.36 million profit for the quarter ending September 30, 2010. What is perhaps most striking about this turnaround is that while volatile in nature, price has been on a northern trajectory since March ’09. While in line with the broad market recovery, the timing of this price climb has been well in advance of the improvement in the fundamentals of the stock.
While price may have surged ahead of itself in the short-term, there exists a tremendous opportunity to play support levels and the Elliot Waves that lie ahead. Specially, we’re looking to buy in a value zone that is present between $2.90 and $3.30.
Any purchases made between these figures should yield a satisfactory risk to reward ratio. Assuming your average entry into stock is $3.10/share or so with a stop loss placed just below major support near $2.70 (horizontal green line on the chart). Your downside exposure is 12.90%. On the other hand, Elliot’s fifth wave, leading to new 52-week highs, will place near-term price slightly above $5.40. Hence, the upside could be 74.19%.
Our Recommendation: Purchase your intended block of shares during the current pullback between $2.90 and $3.30 and look to hold until Gramercy Capital (NYSE:GKK) either reaches its old 52-week high near $5.40 in the short-term, or possibly $7-10/share over the next 12 months.
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