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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis
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To: drakes353 who wrote (2017)11/20/1998 5:07:00 PM
From: Q.   of 2506
 
re. LSN, I took a look.

I had never heard of them before. My first reaction upon looking at Yahoo's profile was to ask why are they selling at half of book.

So then I looked at the filings, and saw that they haven't filed a Q yet, but they did file an NT10Q, which explained that they are writing off a lot of their assets that were previously part of book value.

I guess that means that they were too aggressive in reporting earnings by flowing too much revenue into questionable assets on the balance sheet.

What I don't know is what to make of this going forward.

In shorting a stock with a broken price, I want to make sure that I'm not shorting a beaten-down value stock. So that means assessing the value of the co., and its ability to continue as a going concern as well.

I can't do that easily in this case, because I'm not familiar with what the financial statements of a leasing co. should look like. I can see that LSN has huge negative cash flow from investment (buying equipment) and huge positive cash flow from operations (rental income), and the latter wasn't nearly enough to make up for the former. How much of this misbalance is due to the co. really having a bad model and how much is due to growth of revenues is too hard for me to tell. It just isn't like a manufacturing co. I think I would need more experience before I could gauge how healthy they are.
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