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Federated National Holding Company Message Board

  • pshore42 pshore42 Sep 20, 2011 3:16 PM Flag

    This looks like a steal

    Can anyone tell me why I am wrong?

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    • It does look like a steal.

      Two words of caution though:

      1) For the last 3 years these guys have been losing money hand over fist and they have been anything but honest on their assesment at the end of each quarter. I am hoping for a profitable quarter, but I got a sinking feeling they will have an excuse as to why they didn't profit.

      2) There was heavy volume that took it from 2.90 to 2.30 over the past month or two. There has been very light volume since it hit that low. The last time there was any insider trading was in August of 2010 I believe. With such a discount to book value the ceo was called out on the fact that there has been no insider buying. His response was basically he understands...and thats that. It bugs me like many other people that if this is such a steal than why is nobody on the inside showing faith in the company by buying the stock.

      If they come out in the next quarter and prove that they can become profitable....I will consider this a steal. But until that point, all that comes out of their mouth is hot air and they have historically proven that they will lie to cover up any poor performance. The ceo has been asked on the last 3 earnings call to purchase shares in his own company, and he has yet to do so.

      Tread carefully.

      • 3 Replies to jkoons.rm
      • jkoons,

        I think next quarter should be near break even operationally. The hurrican season wasnt too bad (so far), but its possible there were some unexpected losses.

        Of the $130,000,000 in investments that TCHC holds, about $21 million is in equities. That seems conservative, but considering the market this quarter, its possible they will have some losses associated with them, which may lead to an overall loss. Personally, I wouldnt include those in 'adjusted earnings'.


      • A couple of additional points:

        1) The CEO and the rest of the Board don't need to purchase shares. They can give themselves options at 35% of book.

        Why was the price at 35% of book? They took it there with their poor performance over the past three years. (Losses in 11 out of the last 13 quarters.) Dilute the shareholders and take the value from them. Nice!

        2) A Board member is on record as being against shareholders and shareholder value creation. Why would the Board want to increase the stock price?!? You can run the company into the ground and give themselves options. See #1.

        I only wish you could have heard the conference call. Seriously, who's ever heard a Board Member get on a call and defend why they wouldn't buyback shares in favor of running the company in perpetuity and losing the shareholder's money. It only gets better if you look at the operating history after this call. (and #3 below)

        3) Get an acquisition offer. Reject it without shopping the deal and then lose money for two years. Seriously, HCII offers $5.30/share in cash and stock and the Board dismisses it without an auction process. I still haven't figured out why they didn't get sued for this.

        4) The Board renominates said Director (see #2) who is against the shareholders and the current shareholders actually vote him in again.

        In conclusion, buy this at your own risk. The stock should be a home run, but the Management and Board are incompetent and they will make you pay. They still haven't adequately shown how they are going to show significant earnings in the near future. They might be able to finally get to break-even in Q3. It's been extremely frustrating. Go read all the old transcripts on Seeking Alpha. You'll hear the same excuses every quarter while non of the promises ever came true. Just my two cents. You need to be prepared for the pain.

      • It seems to me that there's a lot of cushion built into the current price.

        As I posted in another post some time ago this company is worth more dead than alive. If the buffoons running this company closed up shop and distributed the assets it would be the best thing that could happen but then they'd have to get real jobs elsewhere and be held accountable.

    • I think they're close to turning themselves around and yes they are way below book etc.

18.05+0.08(+0.45%)Oct 21 4:00 PMEDT