Universal Insurance Holdings (UVE)
I bought UVE before I was doing any type of valuation or anywhere near the amount of research I am doing now. I originally bought into them almost exclusively for the huge dividend, and without reading any annual or quarterly reports at all.
I have thus paid the price for my investing indiscretion and will be selling out at a loss of around 37%, ouch.
Here are my thoughts after valuing and reading its annual and quarterly reports.
Pros:Undervalued on an asset basis. UVE are also selling for less than its net cash per share, an extremely undervalued company at this time. But due to reasons I list below, the undervaluation looks appropriate to me.
Cons: Most importantly, I do not trust management. I called UVE’s IR department to ask some questions about how it invests its money: Who makes the decisions, how do they make the decisions, why do they buy the securities that they buy, are they a value oriented company, etc. The IR department would not or could not answer any of those simple questions.
Especially worrisome since the investments UVE has been making have been losing the company tens of millions of dollars while the stock market as a whole has been going up a lot.
The CEO has been selling quite a bit of stock lately, almost 2 million shares in the past month, which is about 4% of its fully diluted shares.
The executives get paid a lot in my opinion for delivering very little in the time I have been an owner.
I do not see any competitive advantages within the company, and barring the insiders, who own 40% of the shares, taking the company private, I do not see a catalyst at this time that could unlock the value of the shares.
Decision: For the reasons above I will be selling my entire position in UVE.
Kinder Morgan Management (KMR)
I am also going to be selling my entire position in KMR. This decision is a bit harder because I like Kinder Morgan’s management, and its vision for the future.
However, I have made the decision that I need to become more concentrated in my portfolio and free up cash so I do not miss out on another Dole that I find. I have decided that KMR has the least amount of upside potential than my other holdings at this time, and I will be selling my entire KMR position at a 15% gain.