Anthracite Capital, Inc. (AHR)

There appears to be a bottom in share price of around $5.00, but there is increased shorting of this stock (29% of float taking 21 days to cover). When the American market hits bottom, these shorters get killed, sending AHR up 20%+.

This stock is down 40% in the last year. That’s bad! Consider:
· Revenue up 78% during the last 3½ years;
· Assets per share are $0.98, of which $0.53 is cash;
· Diluted EPS in the same period is up only 38%;
· Assets under management up 29% during the last 3½ years;
· Cash flow is negative for the last ½ year because of large paydown of long term debt;
· Return on equity is still on par with the sector at a healthy 14.9%;
· The current PE is 3.32, but is based on $1.58 EPS;
· Earnings probably will drop to $0.95/share = -40%; so
· Future PE will probably go back to 7.0, with price going to $6.65.

So what happens to the dividend? My bet is that it is cut to $0.28, which is what they paid out on 5/1/06. But I still expect a firming and an increase in the share price during the next year. This assumes recovery of the American economy starting in early 2009, which may well be dependent on resolution of the credit crisis. In the meantime, AHR just won’t buy anything more unless it’s on good terms. This company is run by some pretty savvy folks!

Dave