Amtrust Financial Services (AFSI-Q)

(A Top Pick Sept 27/16. Down 48%.) Sold this when it turned out they were being investigated by the SEC for issues on their accounting.

This is in the insurance space for the most part, but about 50% of their revenue is in the small business casualty insurance, as well as having a meaningful exposure to specialty risks. There was talk about potential fraud and cooking the books, and he sold his holdings. Experience has taught him that usually there is more to come. Regardless of the business fundamentals, it is tough to buy into this name right now. What more is going to come out of a potential class-action lawsuit?

This is in the business/casualty insurance space. They also do specialty risk warranties. They have been on a fairly aggressive acquisition spree. They have been buying smaller insurers, cutting costs and using their scale to expand. That acquisition spree is done, and they are now starting to digest. He expects the acquisitions to become accretive by 2017. Trading at around 9X PE. Dividend yield of 2.59%.