I do agree with you on several issues. But I wonder if you would give me your feelings on the following?
The most troubling issue for me is Aames short interest. In August and September short interest was approximately 6,100,000 shares which equated to 23% of outstanding shares. Currently, Aames has over 5,800,000 shorted (down from the 6.1 million) which represents 21% of outstanding shares. Aames' short interest is ranked as the 8th highest company on the NYSE. There must be at least 4,000 companies on the NYSE. Green Tree Financial on the other hand is not ranked in the NYSE top 100 companies shorted. Money Store (NASDQ) has approximately16% of its shares shorted. On 10/27/97 Aames closed at a low of $10.625 per share and on 10/28/97 opened at $9.625 per share, which was a 52-week low. It is my opinion, that in the 1990's only the most intellegent (or the dumbest) investors short. Why, after Aames hit the basement in October did the shorts not cover? Do 21% of the outstanding shareholders believe that Aames will drop lower than the October lows? With the low volumes that Aames has been trading at lately there is at least 19 days to cover. If the shorts began to cover we would see a rapid increase in the stock price. Why do you think the shorts are not covering?
Aames' book value seems to be dropping. A few months ago, its book value was approximately $29 per share based on Vector Vest. Today it is at $23 per share. If management declined an offer at $25 per share (which is 56% more than what the stock is currently trading at) what makes management think that it is worth a high premium? Potential buyers do not seem to think that Aames is worth more than $25 per share. Why?
I will admit that this industry is in the cellar. Out of the 26 companies in this sector none is trading above book value. Only Freddie Mac is trading at 94% of book value.
It is my opinion that Aames has too much overhead supply. This will go on for some time. I have real-time quotes and every time Aames moves up there are sales (overhead supply) to bring it down. Aames cannot make two days of upward momentum. Generally, what ever it makes in one day it pays most of it back the next. Why? Why are investors not at least HOLDING? For example today AAM closed down 1/16, CCR closed up 1/8, CTYS, DFC, DORL unchanged, FNM closed up 1 1/16, FRE up 5/16, MONE up 1/8 and GNT down 5/8. The market went up almost 100 points today and Aames went down. Yesterday it went up « and it lost 12% of that gain today. Why, I have to assume overhead supply. Investors can't wait for it to move up some so they can bail out.
The other thing that troubles me is that the institutions are starting to sell. I am seeing blocks of 10,000-80,000 shares being sold. And one day I saw a block of 200,700 shares sold. These have to be institutional investors the amounts are to high for the average investor.
Technically AAM should test it's high of $15.625 set on 11/05/97 and continue up. However, that could take several months to achieve unless there is an acquisition. Any comments? |
