“Gluttony is good”, a modern Gordon Gekko might have said, in reference to the triumphant return of the coveted mustard belt to America. Joey Chestnut, paying no heed to rising beef prices, managed to consume, quite conspicuously, 66 hot dogs in 12 minutes. Like many former high-flyers, defending six-time champion Takeru Kobayashi suffered from a late ‘reversal’, and was able to manage a mere 63 hot dogs.
Hoping to do for stock picking what eating contests have done for sport, and in honor of the holiday, I have constructed a portfolio of companies whose names contain the word ‘independence’. The portfolio consists of five companies, two insurers, two banks, and one mining concern. Any ETF provider looking for an exciting new index to use is urged to contact me for licensing rights.
Independence Holding Company(IHC) is an insurance holding company with subsidiaries operating in the medical stop loss, fully insured health, life and disability insurance businesses. The company also owns 48% of American Independence Corp, the next stock on the list. While the largest company on the list, IHC is fairly small with a market cap of $315 million. At first glance, a dividend yield of 0.2% and a P/E of 21 look fairly prosaic, but some further looking is in order given a reasonable price/book of 1.3 and recent growth in revenue and earnings. 7/3 close: 20.75
American Independence Corp(AMIC) is a small medical insurer and reinsurer with a market cap of just $93 million. It is controlled by IHC and shares its management team. While the trailing P/E of 43 makes this look pricey, the most recently reported quarter showed a large improvement both sequentially and year over year. Management has stated that last year’s poor results stemmed mainly from business written in 2004, and that performance going forward will be improved. At 1.1 times book with recovering earnings, this stock doesn’t look expensive. 7/3 close: 11.07
1st Independence Financial Group(FIFG) is a Louisville, Kentucky based bank with 8 branches in Kentucky and southern Indiana. The bank yields 1.9% and has a trailing P/E of 21. Recently, the company announced it hired an experienced team of 6 bankers in Indiana who had previously worked at Regions Bank to expand their business in Indiana, and this could conceivably lead to material growth. With a market cap of just $33 million, 1st Independence has plenty of room to grow, and as a profitable company with a price to book ratio of .88 it provides protection on the downside. 7/3 close: 16.80
Independence Federal Savings Bank(IFSB) is a small, 4 branch bank located in the Washington DC area. It has been unprofitable, beset by turmoil of a failed merger and a fight with its largest shareholder. It generally just seems like a bad idea to own.7/3 close:10.11
Independence Lead Mines(ILDM.PK) is an old mining company with no revenue to speak of. Its only asset is land with mineral deposits which were leased to Hecla Mining(HL) in 1968. Under the agreement, Hecla is allowed to recoup costs before paying royalties, and though it has been mining the area for over 9 years, it still has a substantial un-recouped project claims. These peaked at $43 million at the end of 2005, and were down to under $25 million at the end of Q1. It is conceivable that sometime 18-24 months from now, the company might start receiving royalty payments. The company has been staying solvent by executing a series of private placements which have largely funded its litigation against Hecla. As of May, it appears Independence has exhausted its legal options, so the company’s value should be a function of its discounted royalties plus any dilution necessary to get to the first checks. Hecla might have an interest here as well as it gets closer to paying royalties. In any event, this is too hard for me to figure out. 7/3 close: 3.90
Of the five stocks, only the first three seem to warrant further consideration, but for the purposes of tracking this portfolio, we’ll assume an equal weighting of each of the five.
Disclosure: I own none of the stocks mentioned, nor do I recommend any of them