therailsplitter (96.65)

Fishing for Bargains

July 15, 2010 – Comments (1) | RELATED TICKERS: ESGR , GLRE , NLS

     Due to the recent market drop a lot of bargains are floating around in the vast sea of stocks.  For those investors that are interested in doing some fishing a lot of value can be found on the cheap.  As Peter Lynch says, "The person that turns over the most rocks wins the game."

     One of the more interesting value investments is Greenlight Capital, a reinsurer.  Not only do they have strength via their management but they are also inundated with capital.  They also have an incredible business model that should propel growth of both the company and the share price well into the future.  The main focus for the CEO is growing free cash flow and they have been quite successful in that endeavor.  Nearly 83% of the stock is represented by the company's hoard of cash.  With a 44% profit margin and a 28% ROE this one is definitely worth a look or two.

      Also a reinsurer, Enstar Group Limited is a pure value play.  This is a great Peter Lynch stock, trading well below its cash value.  After factoring in the debt, the stock trades for around $20 less than its cash per share.  Insiders also eat their own cooking with 44% of the stock.  The profit margin is a nice 15%, ROE 19%, and a P/E less than competitors and the industry average.

     Nautilus is an interesting turnaround play for those that are a bit more adventurous.  With new management holding a lot of stock, a large cash supply, and a new business model this company could be a multi-bagger.  Recently it has dipped to $1.45 and recovered nicely to around $2.00.  I think it is a buy at the current price levels but I wouldn't mind putting it on the back burner to see if it dips near the $1.45-level again.  I am not sure if investors lost confidence in the stock recently or were just selling to lock in gains but the stock went quickly from strong accumulation to a strong sell-off.  Regardless of the reason it dropped the stock to bargain levels and I expect value investors to keep it afloat at these levels.  P/S is 0.34 and BV is $1.47, which also leaves me feeling fairly confident in the margin-of-safety of this company.            

     Good luck fishing... and as always, don't fool yourselves, fools! 

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