Model manager Analytic Investment added two new positions to their Focus Value model recently. In the model, they use algorithms to look for equity mispricing as a result of market inefficiency. The first position they added was senior, community, nursing and assisted care living facility operators Five Star Quality Care Inc (AMEX: FVE). For the past three years, the company’s reported sales have steadily increased, as they have over the past four quarters. Their total liabilities fell from $327.3 million in 2008 to $273.8 million in 2009 and then even further (to $234 million) in quarter two 2010. FVE also has a low price to earnings ratio when compared to peers. Their stock price has been increasing since the beginning of the month when it closed at $5.09 (on October 1st). On October 13th, FVE closed at $5.77.
The second position added to the model was K-V Pharmaceutical Co (NYSE: KVA). The company’s net revenues grew from $443.6 million in 2007 to $601.9 million in 2008, but then dropped to $312.3 million in 2009. Their liabilities also grew, rising from $409.7 million in 2008 to $517.8 million in 2009. Their stock price has been low for most of the year and in August they were notified that their stock price was not in compliance with listing standards. The price has since become compliant and the company recently announced that they had been extended a $20 million loan to provide working capital and funds for general operations.
