Life Partners Holdings, Inc.
(NDAQ: LPHI) may not be at the top of the list of some
socially-conscious investors but it is definitely at the top for
investors looking for a safe, high-growth investment. Life Partners is
the premier player in what is known as the life settlement industry –
an industry that buys life insurance policies for a fraction of face
value and collects when the policy owner expires. It turns out that
this is an enormously profitable business with net income increasing
515% and total business volume increasing 257% during the company’s
most recent financial results.
Many companies in the financial sector have been troubled by their
exposure to various types of debt. The rising cost of debt combined
with the problems associated with securitized debt has been the
trademark of this most recent downfall. However, life settlements offer
an alternative investment that involves no debt and guaranteed income –
after all, everyone dies at some point. Life Partners bundles and
securitizes these life insurance policies and sells the package to
institutions that are – now more than ever – looking for a safe
investment shielded from the debt and credit markets.
So, why are the company’s shares so beaten down? Well, first of all
some investors are uncomfortable with the fact that the majority of the
company’s clients come from three referring brokers. Secondly, there is
some pending litigation in Virginia that is in appeals court that could
cause problems. Thirdly, many analysts and investors are accustomed to
strong earnings announcements, so when things slow down, it could send
the stock falling.
Trading with a P/E of just 14.8x earnings, many investors believe
that this stock may be close to its bottom (since most of the above has
been priced into the stock). Meanwhile, the company has instituted a
million share buyback program under the belief that the company is
substantially undervalued. So, what does this all mean in the end?
Well, there are a lot of questions remaining, but this is definitely
company worth watching going forward!
Related Companies
MetLife Inc. (MET)
eHealth Inc. (EHTH)
Aon Corporation (AOC)