Aames Financial (AAM) - Undervalued or what??? Message Board

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Non-Tech : Aames Financial (AAM) - Undervalued or what???

AAM 10.64

0.0%

Nov 7 9:30 AM EST

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To: Bankceo who wrote (330)	12/13/1997 5:43:00 PM
From: Bill De	Read Replies (1) of 510

What a difference a day makes. This does not sound good. Did you see that in the Fitch report? I have read it three times and can not find that issue. Or I don't understand the issue. Could you explain this to me? Is this is an accounting issue? If so, aren't they using Generally Accepted Accounting Practices (GAAP)? Price Whaterhouse gave them a nonqualified opinion what is the issue? This is not something that just turned up is it? Didn't investors know about this before? And if so why is it an issue now? I guess I just don't understand the issue. A stock price is like the real estate market here in Southern California. It goes down but will retrace its tracks and a return to it's prior high and hopefully higher. The only major issue is time. How long will it take for AAM to get out of the cellar? We jump back and forth in our conversations discussing fundamental and technical issues. From a technical basis AAM obviously looks good. Cheep price, low P/E, trading at 50% of book value and you must admit that this stock is oversold. Conclusion; way undervalued. But keep one thing in mind; currently this stock has no support. It only has resistance. And it can't move up above its moving averages. If it could, we would see some upward momentum. And I believe the shorts would cover. Not knowing this industry I can't make intelligent comments regarding their fundamental strengths. However, it appears their balance sheet is sound and they are headed in the right direction. Especially their decision to concentrate on the retail end versus bulk. What they do not have is an independent source (such as Fitch) to sing their praises. And I put that blame on management. I believe that neither Thompson (CEO) nor Kornswiet (President) have the ability or the experience to currently get the job done. Which also reflects on the Board for making the decision to get rid of Gary Judas. Let's face it this should be a very good time of year for business. It should continue into the beginning of 1998. This is the time of year everybody is looking for money to pay off holiday bills. Then in the spring, people will be looking for home improvement loans. So the business is there. I agree with David Right (reply #331) on his comment regarding interest rates, inflation and when people will refinance. We must be aware though, that the real estate market is on an upward trend across the country. As real estate values increase people will refinance. However, LTV should be sound. Real estate markets (at least here in LA) are generally ten years in duration and it has just begun to move upward. So all this looks good for AAM. I disagree with Mr. Right and many others who comment that AAM has very little downside potential. AAM was trading under $12 for the first two weeks in May and tested that range in late October. With the current resistance it is possible to go lower than $12. And I believe that what the shorts are waiting for. The Dow gave up some 300 points this week due to South East Asia and poor earnings of the big boys. None of which effects AAM. What are people waiting for? Say what you want about Gary Judas. But I do not believe that AAM stock price would be where it is if he was still there. I believe that he made two fatal errors. One was converting to an entire bulk origination business. Even he saw that error and that is why AAM purchased One Stop (or actually I think One Stop acquired AAM). The second was hiring Cary Thompson. Mr. Thompson has been around since August 1996 as COO. It is my view that he has not contributed to this organization and it was he who had Gary ousted. That turmoil has tremendously hurt AAM and the Directors fell for it. I am really not sure what Mr. Kornswiet contributes to this organization. But he was a good salesman in convincing Gary to pay $40 million for an eight-month-old company. From spending most of my life in a corporate environment I know one thing. Management is the key not only from setting the direction of the company but most important to gain respect and confidence of the investment community. AAM has fallen short there. I still do not believe that institutions and brokers are very warm regarding AAM management or their Directors. Remember what happened to Black & Decker's stock price when "Hacksaw" was hired? Their stock price shot up. Not because of the company but because of him. Approximately a year and a half ago, companies like AAM were being compared to companies financing used cars. That was around the time that Mercury Finance was going down the tubes. Investors Business Daily interviewed Gary who said there should be no comparison between the two industries. AAM pulled out of their slump. The investment community believed in Gary. AAM currently does not have that type of person. Unless in January which is after the "window dressing" period institutions warm up to AAM and the shorts begin to cover (currently there approximately 12 days to cover) you will see the stock price to remain in the $12-$14 range. And I don't see this changing for quite some time regardless of the great fundamental and technical data. Investors are just not impressed.

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