Almost no individual investors even know CLMS is publicly traded. That is evidenced by the 95% percentage of the total float held by insiders and institutions.
There has been a steady succession of insider buys over the past three years whenever the stock got cheap. There were zero insider sells over that whole period.
Calamos has solid finances. As of June 30, 2012, their current ratio was 12.89x and the company was net debt-free (treasury cash-on-hand far exceeded total debt). CLMS has no pension liabilities and no preferred shares outstanding. Capital spending needs are minimal. They averaged just 10-cents per share annually in each of the past three years.
When the market was booming (in 2005 through 2007) CLMS often traded as high as three or four times book value. Today you can own the same shares for just over one times BV. A return to even twice BV would justify a price nearly double the present quote.
Traders in those previous hot market periods accepted average dividends of just 1.1% to 1.7%. Dividend increases since 2009 combined with CLMS's current low price make for an all-time high yield of 4.07% at this morning’s quote of $10.80.
The three-year chart shown below points out the secret to making money with CLMS. Simply buy when the market is unenthusiastic (as judged by relatively low P/Es and yields are above 3.5%). Sell when the mood is bright, multiples exceed 15x and yields drop below 2.75%.
Calamos has a high beta of 1.8. That’s a good thing when you can get in near a bottom. You probably won’t have to wait too long for a nice trading opportunity. A rebound back to even the 2012 peak of $14.10 would provide a chance to lock in a 30.5% capital gain.
Third quarter earnings are due to be announced on Tuesday, Nov. 6. The next dividend is also due for declaration. Dividends were increased 15.8% during the third quarter earnings call last year.
CLMS is one of a small group of fiscally healthy, profitable, high-yielding stocks that is still available near its lows since late in 2009. I’ve joined with the insiders in picking up shares whenever they’ve dipped below $11.
The Trade: Buy CLMS at $10.80 or better
Disclosure: Long CLMS shares