Time to Consider W Holding Company

I first wrote and invested in shares of W Holding Company, Inc. [[WHI]] on October, 2005 at an average price of $8.44. I sold my position in WHI on January, 2006 at $8.57. During the last year and a half since selling WHI, I’ve watched shares tumble from the $8 range to current prices in the $2 range.

W Holding Company, Inc. operates as the holding company for Westernbank Puerto Rico, which offers business and consumer financial services in Puerto Rico, the United States. As of December 31, 2006, the bank operated 56 bank branches, including 33 in the western and southwestern regions, 14 in the San Juan metropolitan area, 7 in the Northeastern region, and 2 in the Eastern region in Puerto Rico.

WHI’s primary challenges include a weak Puerto Rico economy and uncertain exposure to the Subprime mortgage market. Recent news over an impaired loan has also sent WHI shares on a downward spiral.

The summary of this article by Thomas Kirchner the manager of The Pennsylvania Avenue Event-Driven Fund illustrates the situation clearly:

Nevertheless, we believe that W Holding’s stock has suffered excessively on 6/29, as its maximum exposure is only $120 million and nowhere near the almost-$500 million loss in market capitalization.

Additional downward pressure on WHI comes from the tremendous angst generated by Doral Financial Corporation’s [[DRL]] scandal over restated earnings. The negative publicity over Doral had a ripple effect on investors confidence in shares of Puerto Rico’s banking institutions.

I believe an overblown reaction to the impaired loan has created a rebound in store for WHI. Adding additional weight to consider WHI as an investment is the attractive dividend, currently standing at 8.5% annually. Investors will be encouraged to know that dividend’s are paid on a monthly basis and the company has steadily raised the dividend amount since going public in 1994.

Current worries over subprime mortgages should dampen enthusiasm for banking stocks making WHI a sideways play for sometime. I do see that in the short-term there is a greater risk of exposure to the downside. Long-term I expect that WHI will be a double in the making. My long-term price target for WHI is $4. In the meantime I will continue to collect the 8.5% annual dividend.

*Disclaimer: The author currently owns 5000 shares of WHI purchased at an average price of $2.17.

Purchasing Lundin Mining Corporation

Yesterday I purchased 1000 shares of Lundin Mining Corporation [[LMC]] at $10.19. If the price of base metals rebounds in the second half of 2007, my short-term target sell price for LMC remains unchanged at $13.

An Undervalued Base Metals Miner

With the recent sell off in PM equities, there are a number of undervalued opportunities in the market. I’ve found one stock that is a potentially strong investment if PM equities rebound toward the end of 2007. Raw Greed reader’s know that I enthusiastically endorse a fundamental value investing strategy. I like to see a large amount of cash, low-debt, a high ROA, high ROE and insiders buying shares when others are selling. In this case Lundin Mining Corporation, [[LMC]] fits the profile perfectly. Lets look at a few brief statistics from Lundin’s Yahoo! Finance profile:

Total Cash: 388.21M
Total Debt: 47.73M
ROA: 13.01%
ROE: 22.44%
Trailing P/E: 8.1
Forward P/E: 7.19

Let’s compare this to two large gold miners, Goldcorp, Inc. [[GG]] and Newmont Mining Corporation [[NEM]].

Goldcorp Inc.:

Total Cash: 311.10M
Total Debt: 540.00M
ROA: 2.15%
ROE: 3.02%
Trailing P/E: 55.52
Forward P/E: 27.63

Newmont Mining:

Total Cash: 1.70B
Total Debt: 2.65B
ROA: 2.47%
ROE: 1.83%
Trailing P/E: N/A on Yahoo! Finance
Forward P/E: 25.76

If you look at LMC’s price action it seems to trade with gold’s action making a comparison to Goldcorp and Newmont more meaningful. Admittedly it’s a bit of an apples to oranges comparison mainly due to the fact that Goldcorp and Newmont are principally gold miners and Lundin is involved in mining a variety of base metals. You may also see Lundin compared to miners such as BHP Billiton Limited, [[BHP]] which offers an even more diversified mix of mineral resources. What I would like to illustrate though are the strong fundamentals behind Lundin. To add icing on top of the cake, the Lundin family controls about 14% of the outstanding shares in the company and has recently added another 1 million shares in August, 2007. When insiders control a large percentage of shares they have strong incentive to deliver shareholder value to investors. Everything chalks up to make a strong undervalued investment story behind Lundin Mining. I plan to pick up 1000 shares at under $10.50 and may buy more at under $9.50 if the stock reaches my target buy prices. If the price of base metals rebounds in the second half of the year my target sell price for [[LMC]] is $13 by the end of 2007.

*Disclaimer: The author hold no positions in any of the stocks mentioned in this article.

Raw Greed Undergoes Changes

Raw Greed has been updated to make finding and using the information on this blog easier.

A few items have been added:

My Portfolio Holdings
On the right of the blog you will notice a section titled, “My Portfolio Holdings”. This is a dynamic portfolio that will update each time you refresh the page.

Inline Quotes on Blog Posts
Instead of clicking on a symbol to retrieve its current price, the price and current volume will now be displayed after the symbol. This will help readers keep track and compare stocks mentioned in Raw Greed blog posts with the price target’s I’ve written.

E-mail and Blog Commenting
I’ve added a captcha (a challenge-response test to determine between computers and humans) to reveal my e-mail and comment on Raw Greed . The comments on Raw Greed are open again and the captcha system should help reduce spam.

Adsense Revenue Statistics
To increase the transparency of Raw Greed, current Adsense revenue will be displayed on the Reaching Raw Greed page.

Various Planned Additions

Raw Greed would like to add an AJAX enabled stock portfolio that is dynamically updated using the Yahoo! stock quote API. The Raw Greed portfolio will feature total value, target buy, target sell and % accurateness of picks. The portfolio will make comparing Raw Greed’s performance to other investors easier.

I would like to add additional authors to Raw Greed. If you are a value investor interested in writing for Raw Greed, please send me an e-mail.

Online Investing, A Quick Buy Note on Hecla Mining Company

I’ve had Hecla Mining Company [[HL]] on my watchlist as a potential silver mining investment. Hecla is a 116 year old mining company headquartered in Coeur d’Alene, Idaho. HL dropped today nearly 12% to close at $6.70. I am watching HL carefully for an attractive entry point. Presumably shares of the company dropped on a cut of 2007 gold production. According to this Reuters article:

[Hecla Mining Company]…cut its full-year gold production outlook due to a temporary suspension of operations at its mine in Venezuela.

The precious metals company now expects full-year 2007 gold production of between 115,000 ounces and 120,000 ounces.

It had previously estimated gold production for the year to be 128,000 ounces.

If I am reading this correctly the drop in gold production is an estimated 8-13,000 ounces. This is hardly enough of drop in gold production to warrant a 12% drop in Hecla shares. Investors should note that gold contributes approximately 30% of the companies profit, the remaining 70% comes from silver production. Shares of Hecla may also face downward pressure from a drop in gold and silver prices today. Gold is currently trading at $660.90 and silver is currently trading at $12.63.

If you compare the HL chart to another one of my favorite silver picks, Coeur d’Alene Mines Corporation [[CDE]], you will notice that the two shares have moved almost in lock-step since Coeur has gone public. There is some divergence from CDE in percentage gain. I believe this is mainly due to share dilution used to raise capital for the company and this contributes to CDE’s low P/E of 13. I’ve written previous analysis on Coeur and while I consider the company a fundamentally better value than Hecla, I give HL a nod forward as being a better managed company in terms of delivering shareholder value. It is difficult for CDE investors to realize short to medium-term gains in share price due to the large amount of outstanding shares. While fund and individual accumulation or a possible reverse split of CDE shares will lead to unraveling the true value behind CDE, it will take some time. HL has a reasonable P/E of 21, an ROA of 6.24% and an ROE of 18.81%. The company has 111.34M in cash and no debt.

If you expect that gold and silver prices will rise long-term, now may be a good time to build a position in Hecla while shares are depressed. I expect to see some additional downward pressure on gold and silver prices in the short-term. My 2007 price target for gold is $700 per ounce, my price target for silver is $15 per ounce.

I may look too add HL to my portfolio if shares trade under or at the low $6 range.

*Disclaimer: The author currently owns 15,000 shares of CDE purchased at an average price of $4.24.