No, we investors in drive stocks like to turn gold into iron.
See the following post on OXHP:
exchange2000.com
You'll love it. Has some relevance to DDs (especially Maxtor, I think, but you will probably think also SEG). Texas Pacific gets convertibles with a strike below today's market price, 8 and 9% interest, plus the strike can be lowered if the stock price is below 17.75 when they want to convert! Nice work if you can get it. Those guys turn iron--even badly rusting iron--into gold.
Of course, they couldn't get OXHP's directors to give them puts on their stock, unless it was under the table. Those directors are really shrewd and tough negotiators.
Here is an excerpt from the above post that is especially relevant to DD stocks:
While the mailman's diatribe may seem a bit extreme, the heart of his argument is correct.
The financial results announced today are stunning, staggering. No superlative can overstate
the case. An insurance company can't be sure of its real earnings until well after the results
are set, in effect, by the price of the policy vs. the future unknown costs to be incurred.
Earnings in the short run are merely estimates of what the future may be. Insurance company
managements have unusual leeway in being either aggressive or conservative in their
assumptions.
The results announced by Oxford today reveal that the whole thing has been a sham. Period.
The whole time. Sure sure, they have a franchise, a network, a name, and thousands of
people receive health care from the company. Great. But the whole thing has been perpetrated
on a false notion: that the company was charging high enough premiums to earn a decent
return on capital. Well, well, now we see how Oxford grew so darn fast. They underpriced
their product. The charge taken today wipes out the ENTIRE COMPANY EARNINGS OVER
THE LAST FOUR YEARS! THE COMPANY NEVER MADE ANY MONEY. Nice talking to ya.
You or I could make a business grow if we could undercut our competitors on a price/ value
proposition, especially if we could fib a little about how much we were losing, raise more
equity capital, grow some more, and then sell a bunch of stock before fessing up to reality.
(end excerpt) |
