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Non-Tech : Aames Financial (AAM) - Undervalued or what??? -- Ignore unavailable to you. Want to Upgrade?

To: JAG2 who wrote (301)	11/13/1997 12:26:00 PM
From: Bill De	Read Replies (3) \| Respond to of 510

Basically I agree with you. The stock I believe as of yesterday was trading at a P/E ratio of 12. In fact, I believe that book value is approximately $29 a share. If you look at a chart Aames has been undervalued since mid March 1997. However, investors have lost interest and trust in the company. At least one analyst (out of the eight who follow Aames) that I have spoken with has told me that even they have lost confidence in the company. I also found out that two analysts had planed road trips for Aames in August after they announced earnings. It was their opinion (not mine) that these road shows would add several dollars to the stock price. At that time they were very enthusiastic about the company. If you remember, Aames postponed earnings release twice. Then they dropped the bomb with terrible earnings. One could say that what they did was great by cleaning up their balance sheet. But it really upset analysts because there were no warnings by the company. They lead analysts to believe that they would be meeting street estimates, which if I remember right were 42 cents per share. When earnings were announced, it shocked everyone. That was the third straight quarter in which they disappointed investors. Then all road shows were canceled and the analysts warned management that from now on they had to "put up or shut up". Consequently, analysts and brokers ratings dropped from a 1.6 (1 = a strong buy; 5 = a strong sell) to a 2.1. And I am sure you will remember that there were several downgrades from buy to hold or neutral. Aames was rated as number 12 out of 27. Now I believe it is rated as 22 out of 27. In a conversation I had with one of the analysts, who in August was very high on the company, said that it appears now that the only reason why the price went from $14 a share in June to $23 in August was because people believed that Aames would be acquired. She went on to say that it would take a very long time for the price to get back to appropriate levels. Why? Because of mistrust in management and in addition, the sector is terrible. At that time I predicted that Aames would drop to a low of $10 per share. Everyone I spoke with other than analysts thought I was crazy. I was wrong it dropped to $9 per share. From the second week of March '97 to the second week of May '97 the company lost 67% of it's market capitalization. The stock price went from approximately $32 1/4 to $10 3/4. From August 26 to the present the company lost 41% of market capitalization. And in the last four days the company has lost 14%. Depending on whom you believe the company has a float of about 27 million shares. In March market capitalization was $864,000,000 as of yesterday it was worth $364,000,000. In the last 56 trading days 31 of them have been negative volume, 55% of those days were more sales than purchases. And we still have approximately 5,000,000 shares shorted (one of the highest %'s on the NYSE). I thought that when the stock hit a low of $9 a share a couple of weeks ago that those shorts would reverse. Had those shorts been covered it would have ment several dollars per share on the up side.5,000,000 represents about 10 trading days. I mean how low can this stock go? But still the shorts are still in force. I do not believe that after Greenspan announces that interest rates will remain the same that it will have any effect on the stock price. As I am writing this Greenspan is giving his speech and the stock price is at $13 5/8. The stock has not reacted positively regarding interest rates in the last several months. So I agree with you that the basic company is good and has been around for years and that Gary Judis actually developed the sub-prime lending business. Since November 19 when earning were announced there has been nothing but good news about Aames. And at least one brokerage firm has raised it from neutral to a buy. But the problem is nobody is buying the stock it is still going through a wholesale sell off. Individual investors like you and I can not make the stock price fluctuate. It is the institutions that can put the price up to higher levels. In the last couple of weeks I have seen huge blocks being sold 10,000 shares to 100,000 shares. I even saw one block of 200,700 shares being sold. Assuming that the institutions are the smart ones, why are they selling. If the company is so good and in addition a good buy (which I believe it is at $13 5/8 with a P/E of 12) why is Wall Street turning their back on Aames? It is my opinion and others that nobody is enthusiastic about the current management. And until that changes the stock may not see $19 a share for a long time to come. To me this is not a hold at best. There are too many good companies out there to invest in. So this all boils down to one question I have for everyone. If the stock is such a buy and such a good company why has it dropped $19 a share in seven months? When earnings were announced the stock went up to as high as $16. And within several as usual it gave most of that back. What is the groups response to why nobody no body is willing to buy Aames??? Believe me JAG I wish you were right and if you are I will be the first to admit it. But the question remains why is everyone selling???