At Walter Industries, stock is low but coal is hot
After hitting nearly $112 a share in the past year, the current $30 price of Tampa's Walter Industries Inc. hardly suggests this is a company in anybody's favor. Let's face it. Walter over the years has been the embodiment of everything a conglomerate should not be: A little of this, a little of that and no clear sense of direction.
That may be changing, thanks in part of the decision by Walter's Victor Patrick, vice chairman, chief financial officer and general counsel. Patrick paid $1.4-million for 34,000 shares last week at prices ranging from $38 to $42 each, says an article in Barron's magazine. Patrick's purchase gives him about 140,000 Walter shares, far below 1 percent of shares outstanding. But, the article points out, the transaction is the largest insider purchase at Walter in at least five years, according to InsiderScore.com, and reverses a trend of sales by company executives. In the last 12 months, InsiderScore reports that Walter insiders have sold $19.8-million in company stock.
Stock selloffs by company execs signal a lack of confidence in a stock price. So when somebody starts buying, investors pay attention.
Walter's new mantra is metallurgical coal. It's a key ingredient in the production of steel and it now represents the majority of Walter sales at a time when the company is about to spin off its home financing arm and "continues to evaluate strategic alternatives" for its home-building segment.
"Today marks a momentous step in our strategy to transform Walter Industries into a pure-play natural resources and energy company," Walter chairman Michael Tokarz said in a statement about the spinoff.
The good news is that Walter's holdings of metallurgical coal is high quality. It's the stuff mixed with iron ore to help steel makers produce high-quality steel. The bad news is global construction is down, so the demand for steel is off.
In its quarterly 10Q filing with the Securities and Exchange Commission, Walter defends its newfound commitment to coal:
"Although the steel industry is experiencing a softening in global steel demand, the company's fourth quarter shipments are proceeding as previously expected. The company's metallurgical coal is used as a base coal by its customers. It is management's belief that, on weakening demand, lower quality coals will be the first ones dropped by customers and that the company's very high-quality coking coal will still be in demand and will receive premium pricing as a result of customers focusing on value in use."
Which brings us back to Patrick's bullish purchase of Walter stock. In a note to clients Friday, InsiderScore wrote, "We believe the purchase is a strong vote of confidence in the spin-off plan and the met(allurgical) coal focus going forward." Well, Walter seems to have some good buzz out there. Let's see if that stock price responds.
-- Robert Trigaux, Times Business Columnist