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Companies in crisis are always great buys
2012 Feb 8, 3:10pm 8,331 views 19 comments
by SFace follow (7)
Comments 1 - 17 of 19 Next » Last » Search these comments
uomo_senza_nome
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2012 Feb 9, 3:07am
Over the last 10 years of observing the market, companies in short term crisis not related to the fundamentals of the business have always proof out to be great buys
This is true. This regularly occurs because the market over or underestimates the progression of various companies’ operating profits. The fickle minded nature of the masses imply that screaming buy opportunities exist for the keen observers.
Here's an Austrian view of the stock market:
The purchase of DuPont’s stock in March 2009 at $17 was discounting a 600 basis point fall in operating margin. DuPont’s operating profit in 2008 was $3.5bn, and this share price was discounting a fall (over at most three years) to under $1.1bn by then end of 2012. Purchasing the stock at $17 would already discount a collapse in operating profit yet to be observed and run through the tills.
http://bullionbasis.com/web_documents/course_of_the_exchange_first_quarter_2010.pdf
Thanks SFAce. will checkout the stock.
uomo_senza_nome
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2012 Feb 9, 3:15am
SFAce,
I'm curious what is the implied revenue/operating margin collapse dictated by the market as the stock stands today.
zzyzzx
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2012 Feb 9, 3:17am
They are only a great buy if they don't go under. BOA and ETFC fit your description of troubled companies, but have basically been dead money for years.
rimm has a reason to be where it is. They don't have a competitive product anymore.
B.A.C.A.H.
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2012 Feb 17, 4:43am
Companies in crisis are always great buys
Reminds me of a College Professor friend of mine who bought Wang, he called it a "turn around company".
SFace
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2012 Feb 17, 10:52am
Don't like RIMM at all. Went to Bestbuy mobile stores recently and it was basically Apple, Samsung, and MOTR. IOS and Driod. RIMM is hopelessly behind and the consumer will not come back. The commodity (cheap) phone market is not RIMM's strength.
RIMM would be a perfect target for Google, except they already bought Mortorola Mobile so I can't see an acquirer as well.
Which is too bad because "crackberry" started it all. Management's lack of vision killed them. It would be great business strategy topic and I'm sure every business school will be studying the case of RIMM.
Vicente
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2012 Feb 17, 3:17pm
RIMM reminds me of PALM and its slow death. It may get acquired for it's patents, but that's it.
Yes this is about the only reason I could see buying RIMM. There may actually be a play there you know.
I actually bought some TiVO recently. I love their products but they've never managed to turn their great product into a market dominator. Owned it a decade or so ago for several years but eventually got tired of waiting for the stock to DO something. However they hold a bunch of patents and I'm betting that some larger fish will buy them up just to acquire that portfolio.
Anyone buy Sun Micro when it hit bottom...
Did you learn how to pray afterwards.. I bet you did!
JodyChunder
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2012 Feb 21, 1:28pm
I highly respect SFace's inputs & opinions. :)
That is what he wants. How can you value Inputs and opinions you paid diddly squat for?
Companies in crisis are always great buys
"ARE ALWAYS" is an error.....
Would be better to use "MAY BE" ...
but do your homeowork... read the financial press, financial statement, news stories, do industry comparisions, understand the industry, and check with your professional network.
Than "MAY BE" its a buy!
Crisis = Accounting Irregularities.. run away as fast as you can, and dont look back...
Nothing worse than a day trader looking to dump on the misinformed.
Anyone buy Sun Micro when it hit bottom...
Did you learn how to pray afterwards.. I bet you did!
I knew a guy who lost hundreds of thousands $ of his own and apparently even more of borrowed money on buying Sun Micro, when it was half way down in 2001 (or 2002). He eventually lost his house in Beverly Hills to pay off his debt. (also his wife had left him). Note, Sun was a sound company with good products, great R&D, good work moral.
B.A.C.A.H.
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2012 Feb 25, 1:05am
Then there's the engineer I knew who was laid off during the bursting of the Tech Bubble: rolled the 401 into a self-directed IRA in order to "invest" it all in webvan.
Comments 1 - 17 of 19 Next » Last » Search these comments
Over the last 10 years of observing the market, companies in short term crisis not related to the fundamentals of the business have always proof out to be great buys. Example,
Merck: Sued
BP: Oil Leak,
The point is they always come back and prove to be great buys. Which leads to Diamond Foods ("DMND")
Diamond is a company in crisis after deferring expenses to pump up shares which they used on an acquiring spree. They apparently did it twice. But I am also fairly confident the problem is limited as I know some people in the SF audit desk. The Board of directors decided to clean house and admit to integrity issues. The fundamentals of the business has not changed that much and it's not like a customer looking to buy some snacks from Diamond thinks about these things anyway.
The thesis is of course there is nothing fundamental wrong with the company, except for integrity. You know how it goes, once integrity comes into question, the new management will be double sensitive and most likely will not be an issue again and probably over do it. It's just a matter of time before the money come back (my observation is money comes back in around 3 -6 months). I will be a buyer of DMND sometimes within the next 3-6 months.