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Posted by GrowingValue on August 1, 2007, 1:27 pm
KMA is the next star, for those reasons
1. oversold
2. under book value
3. profitable
4. buyers are fighting shares.
5. take a look at the chart, lows are getting higher, and highs are getting
highers at a fast rate. compare the chart with CBRX and LNX, you will find they
look very similar: First, big drop, then holds well at bottom, then lows and
highs both getting highers, then suddenly the speed accelates.
Good luck. I think this under $5 stock will be around $7-$8 easily, a little bit
below pre drop.
Read the what they disccussed on yahoo board to know why it dropped and why it
will bounce back.
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http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_K/threadview?m=tm&bn=27016&tid=321&mid=326&tof=20&rt=2&frt=2&off=1
Veg...the review will be completed in 2- 3 weeks.As far as Kma is concerned,the
drubbing is overdone,but for different reasons than some of the gurus on this
message board are saying.They have to do 2 things:1) raise more capital by
selling their individual life block of business.It is now being shopped
around.2) they have to show AM Best that their employer stop loss business is
profitable.At this point that business has very high loss ratios.They raised
their rates,so hopefully they get it back to profitability.In order to do this
they have to sacrifice premiums(this also could be done).In the mean time they
have not been downgraded...they will if they dont get their act in order,but I
believe they will.I know the top guys,and they are pretty good.At one point I
was looking to buy the whole company,but decided against it because of their
exposure to the longterm care business,which they stopped writing in 2005,but
they still have the reserve exposure(long tail business).This could be
problematic if they have deficient reserves,so time will tell.Anyway good luck
with this investment.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_K/threadview?m=tm&bn=27016&tid=321&mid=329&tof=20&rt=2&frt=2&off=1
veg...normally unless some adverse development occurs,such as significant
reserve strengthening,they wait until the next rating cycle ,which is next
year.One of my companies had an A with a negative outlook,and it took one year
to get a stable rating.It is easy to get a dowgrade,but harder to get an
upgrade.They should be able get their stop loss loss ratios ,but I am more
concerned on their ultimate exposure on the long term care business,which is
long tail.in other words you are a sitting duck if their reserve estimates are
off.If your assumptions are just a little off,this could translate into big
dollars because of the long tail.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_K/threadview?m=tm&bn=27016&tid=321&mid=340&tof=20&rt=2&frt=2&off=1
Veg...the reserve deficiency normally develops over time.The problem is that a
lot of companies refuse to acknowledge that problem until the time they cant
ignore it anymore.kma is aware of this problem,they dont write any new business
since 2005.The stop loss business is a short tail business.They raised the
rates,but the jury is still out whether they can bring this business back to
profitability.My guess is that they can do this,but you have to wait at least 15
months to have a good indication of the profitability.The rating wont be changed
unless there is some adverse development,such as significant increases in
reserves,losses in other lines of business etc.etc.My gut tells me that this
situation is not that bad.Best would have dowgraded them to B++ instead of
giving them a negative outlook,Veg..just my opinion..there is a lot of value in
this company.They own a good and large TPA(valuable),and they have good
distribution channels,and a good guy at the top.Your down side risk at 4.70 is
minimal.
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tk44_2000 claimed to be an investor who almost bought the company as a whole, so
he should know the company a lot of better than others. he seems to be still
around, so very likely he will contact the company to give an offer again!
This case is very similar to LNX. Look what LNX was doing? up 80% in 2 months
after the big drop.
*****
Growingvalue.com's price target on KMA is $8, a 60% gain from the current price
of $5.
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