Big pop is due anytime...
and tomorrow once republican takes the 41st seat the stock market is going to rocket and all the short interest is going to be covered.
This is great news for LPHI because all the short interest in carries.
LPHI has a huge upward trend buy jittery becuase of all the shorts.
Shorts actually do us a huge favor in the long haul.
Long - this stock should hit 30 bucks in a couple months maybe before.
Auditor resignations are not always red-flags. In the post-ENRON/WCOM world it seems like they are, but if you are a student of financial history, you will find that companies in the past as fired their auditors, and auditors have resigned based on things as rediulous as professionalism and price. Sarbox changed a lot from the auditors perspective, and I think you make some valid arguements, but I can't see where the red flag is.
By the way, I don't think P/E is a good metric to use for this company. Insurance companies trade at sub 10 multiples becuase their earnings are a function of underwriting standards and interst rates. I just like the yield and the danger that xists when you are short a stock that has potential to crush you with a div hike and an auditor nameing. Maybe the shorts know something that we don't. Maybe they are short, but have some protection through options, don't know, I am long.
That is not the worst case scenario.
Cash is roughly $1.50 per share and could quickly drop if and only if everthing goes wrong (you and I believe it won't, but the shorts are hoping there is something behind the auditors leaving). Companies with little growth prospects do not trade at 15x earnings, at least they shouldn't. Would you buy you local drycleaner that earns $100,000 for $1,500,000? Even with the liquidity premium that is too high a price.
I don't know which way to trade this thing right now because the arguments in either direction are so compelling. If they can continue to buy policies from who knows where, and keep getting above market margins, they can continue to grow and that growth will create shorts to cover. Or they can stop growing like the rest of the industry and perhaps drop 30%-50%. Or there is something else dealing with "financial controls" that is wrong and that is why the auditors quit. We can eliminate the third option when a new auditor is found, and take it seriously if a new auditor is not found within a reasonable time.
Good point about the auditor, this issue is still unresolved.
The cash used to pay premiums for extended LE on policies may not be significant due to past advances that are being recouped and washing the current expenses used to pay the premiums. In the past this has been the case, you may be right in argueing that the trend is towards longer LE and this will result in greater expense to LPHI, but this may be a trend that takes years to materialize.
In the end, the short squeeze is worth a shot, short interest is very high. They have 22mil in cash as of last filing, and are only paying out half of their earned income. Cap ex is low, and debt is non-existent. They could stand a one time div increase of say .25 and that would further squeeze the shorts with borrowing costs set to rise and a div increase, the short will cover and move on.
LPHI last had a monthly close over 30 in 2008 and your prediction represents a quick move over over 50% in a stock where doubts are creeping in. What time this afternoon do you see this happening?
Actually it's been in a narrow trading range for just about a year now. Weekly closing
high has been $22.34 in December, 2009 and a
weekly closing low of $14.22 in May, 2009.
This was after an all-time adjusted high of
$32.90 around year-end 2008.
Earnings continue to grow nicely, PE under 10, yield is 5%+.
What's not to like??