King of the Hill: Roseman

01/02/2004 12:00 am EST


Eric Roseman

Editor, The Commodity Trend Alert

Although Eric Naimer-Roseman is new to our coverage in the Digest, I've followed his exceptional research since 1991. His ENR Asset Management, provides advice to high net worth investors; his specialty is alternative investments, such as hedge funds, commodities, and global opportunities. Here's his top pick for 2004.


"Kingsway Financial Services (KFS NYSE), based in Ontario, offers non-standard automobile and other specialty products in Canada and the US . It is a high-risk insurer. Its insurance portfolio covers drivers who do not meet the criteria for coverage by standard automobile insurers. Despite a high-risk insurance book, the company has a great history of earnings growth because of strong market share and exceptional management."


"Kingsway has been a laggard in 2003, due in part to underwriting losses and currency-related issues. The stock trades for peanuts, at just 7.3 times trailing earnings. More importantly, the company's price-to-book-value ratio is just 1.05, or just 5% above its net asset value. The catalyst for an improved valuation will be the recognition of Kingsway's strong earnings power. The next two quarters should prove to be exceptionally strong now that the company has fully provided for past underwriting losses."


"When you buy Kingsway Financial Services, you get the following great attributes every growth investor seeks from a quality investment: An extremely compelling valuation, both absolute and relative to its industry; booming long-term earnings growth; surging net premium growth, mainly in Canada ; and the high probability of currency gains from a lower Canadian dollar in 2004 The stock bottomed earlier this year at US $7.05 on the NYSE and then took another hit in the third quarter. KFS now trades at US $11.40. But it's a long way off the high, and before this turnaround is over, we'll hit the nosebleed section."


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