By popular demand, and coinciding with a market high on a stock with one of
the worst earnings and growth prospects I have ever seen, I am launching the
BFT thread. Let's start with the recent mention of BIT as an overprice stock
in Barron's current Cover Story: "Too, Too Much!":
"Indeed, the shares of most service-sector providers aren't in the bargain
bin;. Bally Total Fitness, a chain of health clubs spun off in '96 from
Bally Entertainment, has nearly quintupled, to 27, since May. According to
First Call, the company's likely to earn about 37 cents a share this year."
The key reason for the impressive run up in price has been significant
accumulation by the heavy weights of a small cap stock. The top ten
institutional shareholders currently hold over 41% of the float (these
include Fidelity and Janus). In addition, BFIT is now the largest holding of
the Pioneer Small Company Fund, and the second largest holding of Janus
Special Situations Fund.
The sudden interest in BFIT sparked from a turnaround promise following
Bally's Entertainment spun-off the company to its stockholders on January 9,
1996. The turnaround promise was based on the following: 1. The hiring of a
new CEO with no experience in the business: Lee S. Hillman. 2. Emphasis on
sales of their controversial long term - three year memberships which are
virtually impossible to cancel and financed at pretty high rates. 3.
Improved facilities coupled with the development of alternate sources of
revenue.
In the age of customer satisfaction, customer deception seems to be the key
driving force behind BFIT's business plan! They coerce people, frequently
young low income folks, into signing three year contracts with a present
value of over 1,000 dollars. This contracts are financed at high rates and
are virtually impossible to cancel. There are so many angry customers out
there that a site devoted exclusively to complaints has attracted a
significant number of responses. Hundreds of complaints have been posted,
and this is just the "tip of the iceberg". It is interesting to see that the
so called "turnaround efforts" have not diminished the rate of contract
related and "other types" of complaint. use.
Link to complaints by date:
compupix.com
Link to main page in which you can get complaints by topic and other
interesting inf. [scroll towards the bottom]
compupix.com
More on the Financials in the next post..... |
