If You Don't Care About a Company's Story, You Don't Care About What Happens to Your Money

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Dec 02, 2014
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Michael Price (Trades, Portfolio), manager of MFP Investors, likes to buy his stocks from companies that are sailing on rough waters. He does not go for the nice and comfortable stocks that are a guaranteed win –Â well, as guaranteed as you can get in the market; we all know nothing is promised when it comes to investing –Â instead, he looks at companies that are selling their shares 30-40% below their estimated intrinsic value.

"We know it's easy to get swept away in a growth market. But I've been in this business more than 25 years, and I've watched investors figure out a way to justify incredible multiples, only to see valuations collapse back to the underlying worth of the company. We are value investors, and, at these prices, we aren't going to buy names like Microsoft," he said.

Price sees an opportunity to profit when a firm is re-structuring or bankrupt, yet he is very inquisitive when it comes to investing in companies. He has four key components he looks at:

  1. How much a company would possibly be valued at and bought by another investor
  2. Intrinsic value
  3. Whether or not management acts on behalf of the interest of the shareholders or on behlaf of personal gain. Also, can management lead the company after re-structuring
  4. How much would the company be worth if someone wanted to purchase it right now

Franklin Financial Corp (FRNK, Financial) is Price's latest purchase, adding to his portfolio of 94 and valued at $8.01 billion.

Franklin Financial is a holding company for Franklin Federal, a federally charged savings bank. Brower Piven, a securities litigation law firm, announced the beginning of a class action law suit on behalf of Franklin Financial's stockholders in relation to the proposed buyout of the company by TowneBank.

The lawsuit stems from an announcement that Franklin Financial had entered into an agreement with TowneBank indicating that Franklin Financial shareholders would receive 1.40 shares of TowneBank stock for each share of Franklin owned, which would come to $23.04 per share.

The current price of the stock is $19.87.

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Here is a look at Price's holding history for FRNK. This chart shows the number of shares at Quarter End in relation to Quarterly Average Price.

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Here we compare the company's revenue with net income.

Latest FRNK Guru Trades
Guru Date Action Avg. Price Current Shares
John Keeley (Trades, Portfolio) 09.30.14 Sold out $20.23 0
John Keeley (Trades, Portfolio) 06.30.14 Reduce $20.23 13,145

Price summed up his investment philosophy and also offered great advice by making a comparison between investing and music.

"Whether they're jukebox musicals –Â I hate the term –Â or new and hip, you gotta pick songs that support the story. If you don't feel for the characters, if you're not worrying about what's going to happen, you're going to fail."