I believe so!
Homeowners Choice (HCII) now has a peaking earning potential of $2.08, cash of $8.85 per share and no debt, and Real estate valued at $1.12 per share.
We believe Homeowners Choice has targeted diversified insurance policies throughout the State of Florida, knowing hurricanes can be devastating leaving a high level of damage but also damage is often in a compressed area. Because of Homeowners Choice's state diversification model, we now believe that their hurricane risk in Florida is limited to about the $3 million potential risk. So if you assume only one hurricane hits Florida, we still project earnings to be around the $1.60 range.
It's our contention that profitable companies should trade above the level of cash in the bank. At one hurricane or $1.60 times a PE of $9.42 (the property and casualty industry average), this comes to $15.07; At $2.08 times a PE of $9.42, this would be $18.84.
With cash at $8.85 per share plus $1.12 in real estate, which appears to be overlooked, this gives --say a buyout firm with about $9.97 of mostly liquid assets-- an ability to buy a $6.50 company. Plus, then, they would receive the remaining company that has over $2 in earning power.
We believe this downturn provides a good opportunity to invest in a very profitable company trading well below cash and at about 3.125 peak earnings!
| Valuation Ratios | Company | Industry | S&P 500 |
| P/E Ratio | 8.36 | *9.42 | 28.15 |
| Beta | 0.43 | n/a | 1.00 |
| Price to Sales | 0.63 | 0.99 | n/a |
| Price to Book | 0.89 | 0.86 | 3.41 |
| Price to Cash Flow | 3.66 | 7.31 | 13.18 |
| % Owned Institutions | 1.61 | 50.64 | n/a |
Disclosure: Durig Capital, Randy Durig, their clients and related accounts have purchased Homeowners Choice with the majority around $8.
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