Enter the ProCentury Corporation

Stealth Stock Alert: PROCENTURY CORP.


Every once in a while I find a stock that has ninja-like stealth qualities. I recently found a small cap company that I think is worth telling you about, ProCentury Corp. (PROS) If you've never heard of PROS, they operate as a specialty property and casualty insurance holding company.

ProCentuary's share price has moved all the way from $10 to $18 in the past year, almost a 100% increase. You might be asking yourself "why would I get into a stock that's already up 100% in the last year"? Let me begin Grasshopper:

The Stockmasters believes that the insurance sector is benefiting from a lack of hurricanes in 2006. In May, the National Oceanic and Atmospheric Association (NOAA) released its annual prediction for the 2006 hurricane season: 13 to 16 storms, 8 to 10 hurricanes, and 4 to 6 major hurricanes (Category 3 or higher). As we approach the end of the season, we’ve seen only 9 named storms, 5 of them became hurricanes and 2 were major hurricanes. El Nino has been practicing walking on rice paper with Kwai Chang Caine and this year he pulled it off.

ProCentury Corporation has a forward P/E of 10.50 and analysts are expecting them to double earnings and revenue in 2007. They've managed to beat estimates in the last 4 quarters which is why the stock has been moving. They pay out a quarterly $.04 dividend, sure it's not much, but I can name hundreds of companies that don't pay out dividends and should be.

Management believes in the company; take a look at their insider trading for November - All Buys:

In September CEO Edward F. Feighan picked up a total of 4,000 shares at a cost of $59,662.

One thing I don't like about the stock is the average daily volume of around 30,000 shares a day. All they need is some good press, and ProCentury will no longer be a stealth stock. My belief is that PROS will fluctuate between the $17-$18 range in the short term while shares consolidate. To become worth of challenging the Dragon, the stock price is going to need to break the $20-$22.50 range, which could happen in the next 6 to 9 months.

ProCentury has potential and if they deliver next quarter just as they have done this past year, the apprentice will become the Master, and a new chapter will begin.

Article written by: Eric Cheshier
Article posted on: December 12th, 2006