Saint Augustine said, “Patience is the companion of wisdom.” And Top Equity News will add that profits can result from combining of the two.
For investors, wisdom comes from due diligence, doing your homework. Or, you can count on TEN doing some of the heavy lifting for you. This week, we will go shopping for potential buy candidates in the insider buying bin.
In addition to insider buying, TEN layers on share buyback programs. It’s just another clue that insiders believe investing in the company is money well spent.
Our research identified an unusual situation that this column will highlight.
Second Curve Capital, LLC continues to gobble up PRIMUS GUARANTY LTD. (PRSG.PK). Primus had a thriving business until the subprime meltdown. They were a specialist in the business of writing credit default swaps (CDS). Remember those?
Nowadays, nobody wants to do business with Primus because they aren’t too big to fail or get bailed out. Facing their new reality, PRSG’s management essentially decided to let the CDSs run their course, sort of like maturing CDs.
According to Second Curves’ founder, Tom Brown, “the company will continue to receive premiums on its remaining CDS portfolio (now $8.2 billion notional) and will generate a significant amount of free cash. The company is using much of that cash to repurchase debt and common stock.
Given all this, figuring out what Primus will eventually be worth as it runs off is not complicated. Calculate the premiums the company will receive between now and the moment its last contracts expire, estimate losses in the interim, then add back the cash that’s already on the company’s balance sheet, and you have Primus’ intrinsic value. Our work puts the number at between $9.00 and $9.50 per share.”
Now that’s where the patience part comes in. Primus closed Tuesday night at $5.50 per share. The entire runoff process could take up to another 2 years. Based on Mr. Brown’s projected price range, investors could make $3.50 to $4.00 per share on a $5.50 investment. That’s a return of 64% to 73% in two years or less.
Obviously, nothing is guaranteed and things could go wrong along the way. However, if TEN is half right, our new found wisdom and your patience could work together to generate substantial profits.
Insider Buying: Don’t Run away from this Runoff is an article from: 
