Yesterday, I finally pulled the trigger and took a position in the Fremont General 9% TOPRS of 2009 FMT.PR. Basically, I bought the preferred stock.
I bought the FMT.PR because it has gotten beat up to the point where it is now yielding 17% which is way too much for a issue that has not missed a dividend payment, ever.
The arguments against the FMT.PR are many.
1) the company has not filed its 2006 10-K, so not enough information is known about the company. Nor has FMT filled
any 10-Qs for the current year of 2007.
2) the company made many subprime loans over the last 5 - 10 years. Some of these subprime loans are in trouble of defaulting.
3) the credit market is punishing all finance companies, especially finance companies that wrote home mortgages, causing some finance companies to declare bankruptcy.
4)the potential losses the company will book in 2006 and 2007 may be enormous.
All these arguments are TRUE.
Yet, I bought because FMT has sold off its subprime business and its subprime portfolio of loans, which should mitigate its losses somewhat. BUT THERE WILL STILL BE LOSSES. FMT has sold off its commercial loans business. Which should give FMT management some working capital to weather the storm.
Historically, FMT has nine lives. It is a survivor. It survived the California workers compensation fraud of the 1990. It survived numerous earthquakes, floods, fires, and riots in its history.
Please be aware FMT was profitable from 1992 thru 1998 and 2001 thru 2005. My data only goes back to 1992. So FMT has a history of profitable operations.
Remember, turnaround specialist, Gerald J Ford took a position in FMT during May 2007. Ford and his staff should provide the management and additional funds needed to re launch FMT into profitablity. Furthermore, FMT has an employee stock ownership program second to none. It employees look at the company as theirs, and treat the customers great.
AND DO NOT FORGET the Fremont Industrial and Loan Bank. FMT owns the bank specializing in CDs for IRAs. I recently visited southern CA and saw with me own eyes. This bank continues to take deposits and its customers remain loyal.
I have not bought the common stock, but I may just buy some FMT common later this year.
Good luck investing (this analysis is not relevant to short term speculating).
Carey Thompson |
