Edward J. Roche's Instablog Edward Roche is the President of Freedom Mountain Investments (http://www.freedommount.com/), an investment firm founded in 2006, located in Paoli, Pennsylvania. Freedom Mountain specializes in identifying hidden value in small and mid size companies before they are recognized by the market. The investment approach is based upon fundamental analysis and places a high emphasis on real and rising financials including sales and earnings. One special approach used to identify a catalyst for release of value is the “Venerable Owner” strategy. This strategy tracks all companies where an older owner owns 40% or more of a company. These situations often lead to sale of the company at a significant premium to market value when the owner seeks to retire. Edward Roche received a Ph. D. degree in Polymer Science and Engineering from the University of Massachusetts and earned an MBA in Finance from the Haub School of Business, St. Joseph’s University, Philadelphia PA. He recently completed a career at the McNeil division of Johnson & Johnson that included high level positions in Business Development and R&D. He is the inventor on 15 US patents in the area of drug delivery and has authored ten scientific publications. Edward J. Roche http://seekingalpha.com An Update on Three Regional Banks http://seekingalpha.com/instablog/153029-edward-j-roche/198709-an-update-on-three-regional-banks?source=feed 198709 On January 20 of this year, I wrote a piece highlighting three regional bank stocks that I thought had promise for 2011 and beyond. Buying bank stocks during periods of economic weakness has historically been a good investment strategy since banks are highly leveraged to the economic cycle and often demonstrate strong returns as the economy recovers.
I selected three banks that I found had fundamental financial strength but which had not yet fully recovered to pre-crash business or stock price levels. These were FNB Corporation (FNB), Heartland Financial (HTLF) and Sterling Bancorp (STL). This article provides an update on prospects for these three.
FNB Corp. (Hermitage Pennsylvania) has continued to grow through mergers and acquisitions. FNB completed a merger with Comm Bancorp on 1/11/11 and subsequently acquired Parkvale Financial (with operations in the Pittsburg area) on 6/15/11 for $130 MM. FNB has posted two reasonably solid quarters in the first half of 2011 with earnings generally in line with expectations. The most recent quarter saw the 7th consecutive quarter of income growth and the 8th consecutive quarter of revenue growth for the company.Net interest margin fell slight from the prior quarter. FNB completed a stock offering during the quarter that raised $62.8 MM in additional capital. FNB reported improvement in credit quality. The company is currently paying a dividend of 4.6%.
Heartland Financial (Dubuque Iowa) had a somewhat disappointing first quarter having to take a $10 MM increased provision for loan and lease losses causing earnings to miss expectations. But yesterday HTLF bounced back with n report of record net income of $10.2 MM. Earnings of 0.54 surged past expectations of 0.22/share. Provisions for loan losses decreased by $6.1 MM(61%) vs. the prior year quarter. Net interest margin rose to 4.23%. The results were quite good considering that HTLF still sees “soft” loan growth demand with some pipeline improvement in select areas. Deposits grew by $46 MM from end of 2011 with favorable improvements in deposit mix. HTLF is currently paying a dividend of 2.5%.
Sterling Bancorp.(New York City) repaid $42 MM in TARP funds on 4/27/11 following completion of a common stock offering that raised $38.6 MM.  Earnings for Q1 were up 20% vs. prior year and then basically flat in Q2 (given the increase in share count). STL reported strong (+10.3%) loan growth with particular strength in the mid-market area that it targets. Deposits grew by 21.9%. The company is bullish on prospects for the rest of the year seeing strong demand for its products and services. STL currently pays a dividend of 3.6%.
Given the tepid nature of the recovery in the US economy to date, the above results have met my expectations   I have continued to acquire shares in all of these companies for my individual accounts and for accounts managed for Freedom Mountain Investment clients. I believe that as the US economic recovery gains strength all of these well run companies should see substantial improvement in their businesses resulting in significantly higher share prices. 


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I hold long positions in FNB, HTLF and STL.]]> Tue, 26 Jul 2011 11:28:55 -0400 On January 20 of this year, I wrote a piece highlighting three regional bank stocks that I thought had promise for 2011 and beyond. Buying bank stocks during periods of economic weakness has historically been a good investment strategy since banks are highly leveraged to the economic cycle and often demonstrate strong returns as the economy recovers.
I selected three banks that I found had fundamental financial strength but which had not yet fully recovered to pre-crash business or stock price levels. These were FNB Corporation (FNB), Heartland Financial (HTLF) and Sterling Bancorp (STL). This article provides an update on prospects for these three.
FNB Corp. (Hermitage Pennsylvania) has continued to grow through mergers and acquisitions. FNB completed a merger with Comm Bancorp on 1/11/11 and subsequently acquired Parkvale Financial (with operations in the Pittsburg area) on 6/15/11 for $130 MM. FNB has posted two reasonably solid quarters in the first half of 2011 with earnings generally in line with expectations. The most recent quarter saw the 7th consecutive quarter of income growth and the 8th consecutive quarter of revenue growth for the company.Net interest margin fell slight from the prior quarter. FNB completed a stock offering during the quarter that raised $62.8 MM in additional capital. FNB reported improvement in credit quality. The company is currently paying a dividend of 4.6%.
Heartland Financial (Dubuque Iowa) had a somewhat disappointing first quarter having to take a $10 MM increased provision for loan and lease losses causing earnings to miss expectations. But yesterday HTLF bounced back with n report of record net income of $10.2 MM. Earnings of 0.54 surged past expectations of 0.22/share. Provisions for loan losses decreased by $6.1 MM(61%) vs. the prior year quarter. Net interest margin rose to 4.23%. The results were quite good considering that HTLF still sees “soft” loan growth demand with some pipeline improvement in select areas. Deposits grew by $46 MM from end of 2011 with favorable improvements in deposit mix. HTLF is currently paying a dividend of 2.5%.
Sterling Bancorp.(New York City) repaid $42 MM in TARP funds on 4/27/11 following completion of a common stock offering that raised $38.6 MM.  Earnings for Q1 were up 20% vs. prior year and then basically flat in Q2 (given the increase in share count). STL reported strong (+10.3%) loan growth with particular strength in the mid-market area that it targets. Deposits grew by 21.9%. The company is bullish on prospects for the rest of the year seeing strong demand for its products and services. STL currently pays a dividend of 3.6%.
Given the tepid nature of the recovery in the US economy to date, the above results have met my expectations   I have continued to acquire shares in all of these companies for my individual accounts and for accounts managed for Freedom Mountain Investment clients. I believe that as the US economic recovery gains strength all of these well run companies should see substantial improvement in their businesses resulting in significantly higher share prices. 


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I hold long positions in FNB, HTLF and STL.]]> The Turn-around Continues at Iconics http://seekingalpha.com/instablog/153029-edward-j-roche/86454-the-turn-around-continues-at-iconics?source=feed 86454
  • I last commented on Ikonics (IKNX) in March 2008. .  Ikonics is in the business of development and manufacture of light-sensitive liquid coatings and films, and proprietary substrates for abrasive, rotary, and laser etching. One of its key brands is Chromaline used in screen printing applications
    Ikonics is a micro-cap company that has always come up on my value screens. Apparently private investor Joseph R. Nerges also thinks it is excellent value since he has been systematically acquiring shares for a number of years. His most recent purchase of August 3 brings his ownership position to approximately 20%. While the long term strategy of Mr. Nerges remains uncertain, he was successful in his one prior investment of this type (Penobscot Shoe) when the company was taken over at a nice premium. 
    Like most industrial companies IKNX was hit significantly by the recession. But its last two quarterly reports give good evidence for a turn-around in its businesses. IKNX most recent report of July 29 saw revenues up 12%, earnings up 134% vs. a weak Q last year.

    Bill Ulland, IKONICS CEO, said, "I'm pleased to report a continuation of our strong recovery from last year's recession. All segments of the company contributed to these improved quarterly results, with the export business and our new business initiatives being particularly key to the improved financial results.

    "I am optimistic that our new business initiatives will continue to generate sales increases for some time. As demonstrated by the second quarter results, our cost structure allows sales increases to have a very positive impact on profits."
     
    I continue to hold shares of IKNX in my individual accounts and accounts managed for clients at Freedom Mountain Investments.




     
Back To


Disclosure: I own shares of IKNX in individual and accounts managed from clients at Freedom Mountain Investments]]> Mon, 09 Aug 2010 12:25:43 -0400
  • I last commented on Ikonics (IKNX) in March 2008. .  Ikonics is in the business of development and manufacture of light-sensitive liquid coatings and films, and proprietary substrates for abrasive, rotary, and laser etching. One of its key brands is Chromaline used in screen printing applications
    Ikonics is a micro-cap company that has always come up on my value screens. Apparently private investor Joseph R. Nerges also thinks it is excellent value since he has been systematically acquiring shares for a number of years. His most recent purchase of August 3 brings his ownership position to approximately 20%. While the long term strategy of Mr. Nerges remains uncertain, he was successful in his one prior investment of this type (Penobscot Shoe) when the company was taken over at a nice premium. 
    Like most industrial companies IKNX was hit significantly by the recession. But its last two quarterly reports give good evidence for a turn-around in its businesses. IKNX most recent report of July 29 saw revenues up 12%, earnings up 134% vs. a weak Q last year.

    Bill Ulland, IKONICS CEO, said, "I'm pleased to report a continuation of our strong recovery from last year's recession. All segments of the company contributed to these improved quarterly results, with the export business and our new business initiatives being particularly key to the improved financial results.

    "I am optimistic that our new business initiatives will continue to generate sales increases for some time. As demonstrated by the second quarter results, our cost structure allows sales increases to have a very positive impact on profits."
     
    I continue to hold shares of IKNX in my individual accounts and accounts managed for clients at Freedom Mountain Investments.




     
Back To


Disclosure: I own shares of IKNX in individual and accounts managed from clients at Freedom Mountain Investments]]> iknx The Turn-around Continues at Ikonics http://seekingalpha.com/instablog/153029-edward-j-roche/86205-the-turn-around-continues-at-ikonics?source=feed 86205 I last commented on Ikonics (IKNX) in March 2008. .  Ikonics is in the business of development and manufacture of light-sensitive liquid coatings and films, and proprietary substrates for abrasive, rotary, and laser etching. One of its key brands is Chromaline used in screen printing applications
Ikonics is a micro-cap company that has always come up on my value screens. Apparently private investor Joseph R. Nerges also thinks it is excellent value since he has been systematically acquiring shares for a number of years. His most recent purchase of August 3 brings his ownership position to approximately 20%. While the long term strategy of Mr. Nerges remains uncertain, he was successful in his one prior investment of this type (Penobscot Shoe) when the company was taken over at a nice premium. 
Like most industrial companies IKNX was hit significantly by the recession. But its last two quarterly reports give good evidence for a turn-around in its businesses. IKNX most recent report of July 29 saw revenues up 12%, earnings up 134% vs. a weak Q last year.

Bill Ulland, IKONICS CEO, said, "I'm pleased to report a continuation of our strong recovery from last year's recession. All segments of the company contributed to these improved quarterly results, with the export business and our new business initiatives being particularly key to the improved financial results.

"I am optimistic that our new business initiatives will continue to generate sales increases for some time. As demonstrated by the second quarter results, our cost structure allows sales increases to have a very positive impact on profits."
I continue to hold shares of IKNX in my individual accounts and accounts managed for clients at Freedom Mountain Investments.




Disclosure: I own shares of IKNX in individual accouns and accounts managed for clients at Freedom Mountain Investments]]> Sat, 07 Aug 2010 14:17:19 -0400 I last commented on Ikonics (IKNX) in March 2008. .  Ikonics is in the business of development and manufacture of light-sensitive liquid coatings and films, and proprietary substrates for abrasive, rotary, and laser etching. One of its key brands is Chromaline used in screen printing applications
Ikonics is a micro-cap company that has always come up on my value screens. Apparently private investor Joseph R. Nerges also thinks it is excellent value since he has been systematically acquiring shares for a number of years. His most recent purchase of August 3 brings his ownership position to approximately 20%. While the long term strategy of Mr. Nerges remains uncertain, he was successful in his one prior investment of this type (Penobscot Shoe) when the company was taken over at a nice premium. 
Like most industrial companies IKNX was hit significantly by the recession. But its last two quarterly reports give good evidence for a turn-around in its businesses. IKNX most recent report of July 29 saw revenues up 12%, earnings up 134% vs. a weak Q last year.

Bill Ulland, IKONICS CEO, said, "I'm pleased to report a continuation of our strong recovery from last year's recession. All segments of the company contributed to these improved quarterly results, with the export business and our new business initiatives being particularly key to the improved financial results.

"I am optimistic that our new business initiatives will continue to generate sales increases for some time. As demonstrated by the second quarter results, our cost structure allows sales increases to have a very positive impact on profits."
I continue to hold shares of IKNX in my individual accounts and accounts managed for clients at Freedom Mountain Investments.




Disclosure: I own shares of IKNX in individual accouns and accounts managed for clients at Freedom Mountain Investments]]> iknx Navigators Group - Turning the Corner? http://seekingalpha.com/instablog/153029-edward-j-roche/22310-navigators-group-turning-the-corner?source=feed 22310 One of the largest holdings in my individual accounts and a top ten holding in accounts managed by Freedom Mountain Investments is Navigator's Group (NAVG). I have outlined the basic case for this company in February 2008:

http://seekingalpha.com/article/65453-profiting-fr...

NAVG has had a few soft quarters of late along with pretty much every other Property and Casualty Insurance company. But when NAVG reported earnings last Thursday the report while not gangbusters, did sound a much more positive note:

http://finance.yahoo.com/news/Navigators-Reports-S...

Navigators’ Chief Executive Officer Stan Galanski commented, “We are very pleased with the second quarter results. Strong operating performance and improved investment valuations enabled us to increase book value 5% during the quarter.

One of the growing lines of business mentioned in the report and highlighted in the conference call was Director's and Liability insurance:

"Our Directors and Officers Liability business grew significantly as we continue to benefit from market dislocation and a flight to quality."

I believe that flight from troubled firms like AIG has benefited Navigators.

Other business lines such as construction related insurance did not show signs of improvement.

Overall this is a top notch P&C insurance firm. NAVG is conservative in writing insurance and refuses to chase unprofitable business. It concentrates on niches where it can have competitive advantage. It will grow and continue to prosper as the economy improves. It is not selling at an extreme bargain currently (around $50), but I would recommend purchases (as I have in the past year) if the price goes below $45.]]> Wed, 12 Aug 2009 09:01:13 -0400 One of the largest holdings in my individual accounts and a top ten holding in accounts managed by Freedom Mountain Investments is Navigator's Group (NAVG). I have outlined the basic case for this company in February 2008:

http://seekingalpha.com/article/65453-profiting-fr...

NAVG has had a few soft quarters of late along with pretty much every other Property and Casualty Insurance company. But when NAVG reported earnings last Thursday the report while not gangbusters, did sound a much more positive note:

http://finance.yahoo.com/news/Navigators-Reports-S...

Navigators’ Chief Executive Officer Stan Galanski commented, “We are very pleased with the second quarter results. Strong operating performance and improved investment valuations enabled us to increase book value 5% during the quarter.

One of the growing lines of business mentioned in the report and highlighted in the conference call was Director's and Liability insurance:

"Our Directors and Officers Liability business grew significantly as we continue to benefit from market dislocation and a flight to quality."

I believe that flight from troubled firms like AIG has benefited Navigators.

Other business lines such as construction related insurance did not show signs of improvement.

Overall this is a top notch P&C insurance firm. NAVG is conservative in writing insurance and refuses to chase unprofitable business. It concentrates on niches where it can have competitive advantage. It will grow and continue to prosper as the economy improves. It is not selling at an extreme bargain currently (around $50), but I would recommend purchases (as I have in the past year) if the price goes below $45.]]>