Thursday, January 23, 2014

Paul's concerns and my answers

paulthetree  6 hours ago
here are a few concerns.
1) As far as I can figure out, only retail investor and hedge funds have invested. Why? (I have seen numbers as low as $6 and as high as $360.)
2) Why no mutual funds? I understand many, but not all can not invest in a stock under $5. I realize mutual funds are more limited in scope than hedge funds, but it does not rule ALL out.
3) If it is such a sure thing (investment at least doubles), why haven't people like Warren Buffett or Carl Icahn jumped on board?
4) Why haven't we heard of any major institution making major buys?
5) This is my major concern. If all we read from those who believe it is drastically undervalued is true, why is the price still at three dollars and change? Why haven't the big boys came in a scooped up these share which are worth double to 120X present PPS?
6) Why are most of the high rollers going with preferred shares and not common?
7) Why are most if not all the lawsuits filed in behalf of preferred shares and not common?
8) Is there any special voting power the Government's preferred shares have?
9) What would this new government entity (unfortunately I don't recall what it was called) which was formed earlier this year to replace FHFA do to common shareholders?
10) I have heard the expiration date for the government to exercise warrants have past, then I hear they aren't. Which is it? If it has not passed and the government decides to exercise them, 79% of common shares will lower the value greatly of any potential windfall.

That is a start to a list of concerns. I believe ten should get my point across. My personal advice to any investor, is don't bet the farm on a speculative stock. Especially if they don't have a satisfactory responses to these type of questions. This is a high risk / high reward stock. I, sincerely, hope all who are invested or are thinking of investing realize this.

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My Answers:

1) Retail, thats us, and anyone that held this long term since before conservatorship. Hedge funds buy what they think will make money. As far as Institutions they have rules on their buying that most likely do not allow OTC buying. 
2)Mutual Funds do own shares, look at Major holders list, Fairholm is a mutual fund too.
Top Institutional Holders
HolderShares% OutValue*Reported
Edge Wealth Management100,4500.01302,354Dec 31, 2013
Geduld, Emanuel, E.100,0000.01131,000Sep 30, 2013
Rhumbline Advisors63,5000.0183,185Sep 30, 2013
PanAgora Asset Management, Inc.7,2000.009,432Sep 30, 2013
Tradition Capital Management LLC10,0000.0013,100Sep 30, 2013
Livingston Group Asset Mgt Co., Operating as Southport Capit10,0000.0030,100Dec 31, 2013
SOL Capital Management CO10,5000.0013,755Sep 30, 2013
Ray (Gerald L) & Associates17,7000.0023,187Sep 30, 2013
RBF Capital, LLC50,0000.0065,500Sep 30, 2013
AlphaMark Advisors, LLC5,9130.007,746Sep 30, 2013

Top Mutual Fund Holders
HolderShares% OutValue*Reported
Capital Income Builder, Inc.12,458,2061.0837,499,200Dec 31, 2013
Lord Abbett Bond-Debenture Fund818,0000.071,071,580Sep 30, 2013
MET Investors Ser Tr-Lord Abbett Bond Debenture Portfolio227,2750.02297,730Sep 30, 2013
Lord Abbett Series Fund-Bond Debenture Portfolio36,0000.0047,160Sep 30, 2013
John Hancock Var Ins Tr-Total Stock Market Index Tr27,6930.0036,277Sep 30, 2013
Principled Equity Market Fund5,5000.007,205Sep 30, 2013
  
3)Fairholm and Ackman are not small potatoes. Buffet does not own all stocks. Nor does Icahn. No on says its a sure thing, just like any other stock.
4)we have and this is addressed in no 2
5)This is not a sure thing, there is risk. Political risk. You have to decide what you think will happen. The downside is you lose all your money invested, the upside you make 30x your investment. If it were a sure thing it would be that price now. The court will decide. You have to decide before that day.
6)If company is liquidated the preferred shares get paid first, after the govt shares get paid. then common. you have to decide if F&F will be liquidated. THEY are the most profitable companies in 2013. Liquidate? I think not.
7) The lawsuits benefit both preferred and common.
8)The govt shares have NO voting powers, NONE.
9)FMIC would replace FHFA. It would be same as FHFA is now. accept it would insure 5 trillion dollars of F&F for a fee.
10)Hera only allowed purchases till 2009 by the treasury. The agreement with F&F went on for 20 years or more. even if diluted and F&F removed from conservatorship, the commons would be worth $60 a share. And the govt would face a takings of 80% of my property. Dilution. constitution of the USA, govt must pay for property it takes.

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