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

To: Bankceo who wrote (321)	12/7/1997 12:14:00 AM
From: Bill De	Read Replies (1) \| Respond to of 510

It was your "BANKceo" in addition to your knowledge of the industry that gave it away. I have a corporate tax background. My last two employment projects were Director of Western Airlines world wide tax department, Chairman of the Air Transport Association's Taxation Committee and Senior Tax Manager with KPMG Peat Marwick. So with my very limited knowledge of this industry I rely more on technical and historical data in my attempt to make sense of a particular company. I guess I agree with your theory of why the institutions are selling AAM. However, it is my understanding that most funds want little cash towards the end of the year. If that is true, and they have a low cash position as well as a cleaned out portfolio (minus AAM) what makes you think that they will contribute to this rally in January? Assuming that the price by year-end is $16, the shorts lost approximately $6 a share. Why do you feel they will cover in January when they did not in October? I mean I agree that currently it is very risky to hold a short for such a long period. But could they be so far off in their thinking? I agree with you that AAM "got shot with their cousins". But it is obvious that the severe drop in August was due to two things, a: management did not warn investors about their write-off and their postponement of earnings twice and b: most investors felt that a take over was eminent. To me that was management's problem. The reason why the stock has not rebounded even when there is good news such as making earnings expectations is in part due to the rest of the industry. AAM seems to have their financials in order and hopefully for the future and they cleaned up their balance sheet (which should make it suitable to a suitor). My feeling is that management should be out making noise about this in order to get investors to realize that they should hold or accumulate. And I do not see this being done. There were road shows planed for AAM subsequent to Q-4 earnings. Regardless of the nonexistent acquisition the road shows would have had a great impact on the stock price. It may have traded for book value. That was put on hold and AAM followed their "cousins". Or maybe management is taking care of other business. That is if a sale is highly probable. I look at it this way last May we saw reports that AAM was in play. Currently, AAM has a market capitalization of approximately $350,000,000. At book value it would be approximately $650,000,000. This is a very small purchase for an institution such as a bank. What is taking so long? Do you think current management is trying to sell it in pieces and then keep One Stop? And is it your belief that a sale is still in the near future? I am confused about one issue. I don't understand why lower interest rates results in higher prepayment rates. If interest were low would not the loan probably reach maturity? If interest rates were higher would that not contribute to earlier payoffs to save on excessive interest? Can you explain this to me? Also, how is higher prepayment rates handled on the financials? How would it be an expense? Again, keep in mind that I know very little about this industry. However, I looked at all the charts in this group and noticed blood on many of them. I think most are oversold and bases are forming. That's probably why I'm still here. I am also going to look at MVSI.