My recent longs are - much speculation in it but see my post on Pinks Picks.
CLR Clarion, with a nice book value of official 16 as of 31 8 1998, my estimate is between 12 and 13. THe NAV mark to market seems a bit lower due to credit spreads but the market is in normalizing mood
there. CLR hit the market this year and seems to be not too exposed to Treasury-Credit spreads, as their leverage is only 2:1 (Treasury repo:equity).
I bought CLR in small blocks at 2 7/8 and 3 7/16 based on Pink short answer: speculative. CLR is not that liquid!
Important is: TMA, as the are upgraded, and CFN. I bought both today into the opening and fare well. AHR (Anthracite) seems to have some value.
AMMB is a different story. First they have been mixed with Arab-Malaysian merchants Bank. THe took a hit to south 2. On Fri, the rocketed 80% and today 50% so far. Now they sit around 6 but I didn't forget to short some in the high sixes. The posted a Nil EPS estimate, earnings release is Oct.20.
About LFCO: This is the co who left the FP merger, yes? As the merger was planned in FP stock it went off with FP. Their business is actually the same as troubled others. But they state their loans are "better" secured.
They are dirt cheap, but rely on credit quality and they have to find brokers for their loans after the FP relationship breakup (expect that they stop business with FP as consequence of the breakup, IMHO). Almost all of their loans they sold recently to FP (89% in Q2, 42$ in 6-months).
They have already 2% nonperfoming assets of which their average allowance is only 25% (drop from 50% as at 31/12/97), so expect some negative surprises here, if they increase the allowance to 50%. Effect is some -$2.25M.
(see sec.yahoo.com
They have little overhead capital: See capital requirements:
"The Bank was in compliance with the minimum capital requirements in effect as of June 30, 1998. The following table reflects the required ratios and the actual capital ratios of the Bank as of June 30, 1998:
Actual Required Excess Actual Required
Capital Capital Amount Percent Percent(a)
-------- ----------- --------- ------- ----------
(Dollars in thousands)
Tangible $27,845 $16,716 $11,129 6.66% 1.50%
Core $27,845 $16,716 $11,129 6.66% 3.00%
Risk-based $29,332 $24,556 $ 4,776 9.55% 8.00%
(a) The percentages and ratios to be well-capitalized under prompt and corrective action provisions as issued by the OTS are 10.00% for risk-based assets, 5% for core capital and 6% for Tier I capital. At June 30, 1998, the Bank's ratios were 9.55%, 6.66% and 9.07%, respectively. "
So it is a risky game based on the fact that they manage not to lose capital in the next quarters. because they have to maintain those ratios.Their interest income in comparison the loan provisions to be made is wafer-thin. Compare the $2.4M net interest income with the above allowance requirement.
But luckily, they have underwriting and fee income, net at $3M. The gross was at 9M so they have to conducr business under all circumstances.
So from the $4.9M some $2.5M remains, yielding some 0.36 per share.
They will have the benefit that the merger costs ($500K) should be one time.
Now it is to bid at 4 1/8 or a bit under as the market retreats. If it survives the next q, it is good for 8 or 10. I would try a small block, though, but set a personal selling target at 6 or 6.25
Still, my favorites are the beaten down CM REITS as the have huge book values and an easy to read 10Qs. Their risks are not as multidimensional as the special finance co.
I diverted half my net long value on REITs, like the co's above.
C. |
