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Strategies & Market Trends : Value Investing

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To: cgw1948 who wrote (12524)	5/25/2001 7:51:27 PM
From: TimbaBear	Read Replies (1) of 78717

cgw1948: Regarding CNGR....this company is the poster child for why I don't use Book Value or Shareholder Equity for anything more than a chuckle! I just did my analysis of the numbers for 1999, 2000, and the most recent 9 months. The Book Value went from $5.10 to $6.12 to $8.17 respectively. Nice progression, no? My NetNet valuation for that period, in the same order went from $1.19 to -$.81 to -$.61. That paints quite a different picture for me. Although I am showing CNGR as wildly free cash flow positive, all of the positive comes after adding back the money invested in the loan originations. With a sub-prime lender, I don't feel comfortable doing that. Some lenders idea of qualifying is to pass a mirror under the applicants nose to see if they're breathing, if the mirror fogs, it's a done deal, if not, they might need a co-signer. I suspect CNGR's underwriting standards may not be even this stringent. Easy to build up huge sales and originations and apparent profits when no one gets turned down. You just write everybody who shows up. But GreenTree and Flagship are testimony to the aftermath when the paper can't be sold and the notes can't be collected upon. No margin of safety for me in this one. I'll pass. Timba

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