Sell other investments to raise cash?
I think FSYS is undervalued as well, but something could always go wrong or my analysis could be flawed. Management may feel similarly cautious and want to preserve cash for now. I am not sure if they are being overly cautious or appropriately conservative.
Perhaps it would compromise the long term viability of the company. They want the cash in case of either an financial emergency or potential opportunity. But if you feel the company is undervalued and should buy back it shares then why not take advantage and use the opportunity to buy shares yourself? Perhaps, like the company, you feel that you should not use up all your cash?
They just sold 390,000 acres of the 567,000 that they own. They will get 565 million. The book value of the land was 54 million (all numbers from SEC filings). Based on 92 million shares outstanding, book value per share rises $5.50 (assuming zero taxes which is of course overly optimistic). Their BV per share was about $6. Now it will be $11.50 at best. Stock price is about $20. Is the rest of the company worth $8.50? Certainly their earnings do not justify it. What about the value of the remaining 170,000 acres? Lets assume that the land is worth about the same as the land they just sold. That would only add another $2.50 per share which makes it $14 per share. Where is the rest of the value?
I know this stock is heavily shorted. The shorts are taking a huge risk. The stock is overvalued but not by that much.
It's amazing how a favorable article in Baron's can move a stock. Nothing has changed since Friday except a publication has expressed its opinion. Be careful! Barron's recommendations which are usually bullish end up badly. The smart money sells as soon the stock rises after the article's publication.
I'm real tempted here but I have to remind myself of Buffett's principle: Rule #1: Don't Lose Money. Any CEO who allows himself to be in a position to have margin call on his shares cannot be conservative enough to run an insurance company. Can we be even be sure that they have enough reserves for losses? At the very least it is prudent to wait until 2nd quarter earnings are released on Oct 7.
Good luck all!
Company was on many lists last weekend because of high volume of insider purchases (Wall Street Journal and Barron's). That's how I heard about it. Since volume traded is so low, even small orders drive up the price significantly.
I am totally unimpressed by the company though. Inventories as a share of revenues is rising. Weak Balance sheet in a shrinking company does not bode well for investors. Be careful!