TimbaBear, re: WAKB. Possible we both could be right on WAKB (or that I could be wrong). I say that WAKB's okay for me for an investment. I'm not looking for an absolute margin of safety that might be provided by buying the stock below its liquidation value. (My margin of safety is augmented somewhat by having this stock within a diversified portfolio.) Nor am I comfortable even calculating its liquidation value. I do calculate fair valuation of WAKB though at about $14+ based on its book value, ROE, a capitalization rate, and sales growth. (Stock's now about 8 11/16). $14+ might be a reasonable and doable price -- the stock's been above 15 for the years '96-99, but not this year.
Holding the stock back imo are the poor margins (they've been low historically) going into a difficult economy (as you point out), and possible readjustment of current and prior earnings due to SEC rule changes. Elimination of dividend also is a big negative, imho. Maybe the biggest negative is the mishmash of stock types - WAKB, WAK, WHC. In 2001, perhaps we'll see potential investors avoid WAKB because of a concern there might be less outsourcing of the prison/corrections business given the escape of the Texas 7 in a facility controlled by the public sector. Plus the uncertainty of a new President and Congress regarding health care (for the hospital management business).
Factors that could propel the stock are the continuing good growth (new contract wins, add-on contracts, extended contracts), and the management skills under the Wackenhut family. (I am assuming their egos and reputations as well as their name are on the line.)
For me, I am trying to focus on the value that I believe I see. An historically low price/sales ratio (at a time when sales are still growing)-- and it may be absolutely low at .05, a relatively low price to stated book value which itself is growing, not too much long term debt, not too bad a price to earnings.
WAKB has provided guidance that they expect 2000 year's earnings to be $1.19 to $1.28. Last year, I was expecting better numbers than we will see here, so I'm disappointed. Nevertheless, imo, if the performance remains at the $1.28 level, I can foresee (or fool myself -g-) into believing that a price of $14-15 is not unreasonable for this stock, if one can be patient to wait for it.
Paul Senior
There! My take on WAKB without reading any of the SEC filings -g-. |
