Gilford Securities, a full-service investment firm, headquartered in New York City, announced a change in recommendation on Homeowners Choice (HCI) downgrading their previous Buy rating to a Neutral rating in a research report issued to clients. The Gilford Securities analyst noted, “While we recognize that our $36 price target included no new value creation events, we still have to recognize that even when we include the expected dividend stream there is only an 8% potential return available to investors by waiting for our price target. Since we also recognize that investors are likely to start focusing their attention on the onset of the 2013 hurricane season, it only makes sense to stop buying the shares when there is less than 8% incremental return remaining to our price target. As a result, and given that HCI shares have generated a 67% return since our upgrade last September, we will take advantage of the nearly full valuation to downgrade HCI from Buy to Neutral. There is no change to our $36 price target or to our EPS estimates.”
The analyst further noted, “Our rating change is in no way a reflection of a lack of enthusiasm for HCI or the HCI management team.” Rather, investors will become less likely to give the stock full credit for potential future value creation measures with the advent of the hurricane season; even in light of the recent debenture offering which gives management tremendous dry powder. After all, EPS will begin to reflect the normalized, fully reinsured run rate as soon as the hurricane season is over, unless management initiates a new value creation event. Simply put, with little upside return left in our price target, and the onset of hurricane season, we feel it is prudent to move to a Neutral stance at this time.”
About Gilford Securities
Founded in 1979 by senior officers of the former Blythe Eastman Dillon & Co., Gilford Securities is a full-service boutique investment firm providing an array of financial services to institutional and retail clients including corporate finance services, independent equity research, equity sales and trading, retirement planning and wealth management. The firm’s research effort targets select underserved niche segments in the small and middle capitalization market sector.
For more information about Gilford Securities, please visit http://www.gilfordsecurities.com
Contact:
John Richter
Gilford Securities Incorporated
212-888-6400
John.richter@gilfordsecurities.com