Friday, April 29, 2011

Chatting Messenger

It's the last Friday of the month, so Frank (author of value site and I are chatting messenger, where we discuss stories from the web that caught our interest:

Frank: Check out AGX. Tons of cash on hand. Sort of a weird conglomerate structure, but very little debt.
Saj: I've written about it here
Frank: Dammit, Saj, I swear you've looked at 98% of public companies.
Saj: Just the ones with high cash to debt balances...I'm no match for Cramer!
Frank: Can you imagine if you were on that show? Cramer would be screaming and making cow sound effects, and then they'd cut to you, and you'd be totally calm and say something about a company's fundamentals.
Saj: And I'd be off the show at the first commercial break. "Sorry, but when we cut to you, our ratings drop 50%"
Frank: "Yeah, can u at least 'moo' or something? Our research indicates animal noises raise viewer interest levels and strengthen our relationships with advertisers"

Saj: So is now trading at a P/E of 300!
Frank: Seems pretty fair.
Saj: Looks like the late 90's are back...any company with a "dot com" in the name is worth 5 times what it would otherwise be worth.
Frank: And another 5 times that that if they are related to "cloud computing" in any way.
Saj: To be fair, the guy in this video makes a pretty good case for owning shares at the current price.

Saj: Chinese reverse-takeover (RTO) stocks continue to take a beating.
Frank: HQS shows us you don't even need to be an RTO to have those problems, as an independent director resigned after claiming management was stalling him as he had "difficulties in verifying information relating to company accounts and customer positions".
Saj: That's pretty bad on the auditor, which is a fairly sizable firm, if "company accounts" are in question.
Frank: People are always saying the auditor can't prevent fraud, but at the very least can't they verify that the cash account is for real??
Saj: Seriously! It's like they spend all their time getting to really specific inventory numbers, or confirming whether the depreciation method conforms to GAAP, when what we'd really like to know is whether the bank balance exists!
Frank: "Are you straight line or accelerating your depreciation of that mirage?"
Saj: We should be allowed to ask auditors questions. "What is your process for verifying cash balances?"
Frank: As much as short sellers get a bad rap, thank God for them. If short-selling were outlawed, as my lawmakers would like, we'd still be thinking some of these stocks look like good value, because the SEC certainly wouldn't uncover these frauds.


Paul said...

haha. awesome as usual.

have any of you guys checked out Japanese net nets at all? I've never purchased any straight up foreign securities, only ADRs and pinksheets. This is not my blog, so I hope it's okay to post about it here!

I was reading this and became intrigued.


George said...

Could join you guys for next month's chat? It sounds like a fun event.

Financial Independence said...

What would you recommend as a passive investment?

Obviously not everybody has relevant knowledge and time to watch closely the market.

I think that buying individual stock and watching them is time consuming for most of the folks and very very risky. Two facts, as food for thought:
- Only 202 of the 500 biggest companies in the United States in 1980 were still in existence 20 years later.
- On December 29, 1989, Tokyo's Nikkei stock average reached its all-time peak of 38,915.87. Twenty years later, the Nikkei has never again reached that level — and, in 2009, reached a new low of 7,054.98.

What do you think?

Hester said...

The scariest thing is CRM is almost 25% higher than when that video was made.

Saj Karsan said...

Hi Paul, those are good articles but I am mandated to stick to NA exchanges but I would guess there is probably good value there.

Hi George, these are only the highlights! The rest of it is filled with hours of quite normal and boring investment-speak.

Hi FI, for someone without time, I would suggest buying indexes when the indexes are cheap based on something like the PE10. As an alternative, I would suggest giving your money to a value manager who buys financially-safe companies in stable industries who is himself invested in his own fund.