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Strategies & Market Trends : Value Investing

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To: Ben Wa who wrote (11743)	1/8/2001 3:39:00 AM
From: Don Earl	Read Replies (2) of 78842

VOXX is a great example of recent discussions. The Yahoo profile shows book at $14.92. Unfortunately for those who don't read SEC filings, there's an additional 2,260,954 shares of convertible stock not factored into per share numbers. Book is actually $9.60 per share using the company's "estimate" of asset values. Earnings are also affected by the convertible shares to the tune of .04 per quarter and the PE numbers do not take into consideration the frequent "one time charges" for inventory write downs. If inventory has to be written down twice a year it is NOT an "extrodinary item". It's a part of normal operations. Convertible stock and recurring "one time charges" makes the PE of 6 look closer to 12. A careful reading of filings gives a good example of a company whose primary business is selling stock and other securities. The chart gives a good example of what happens when a ton of debentures are converted in to stock and hit the open market along with issuing additional stock. I'd rather pet a rattlesnake than buy into that kind of downtrend. It also happens to be one of those few companies which get an extra year before SAB 101 takes effect due to their fiscal year not matching the calendar year. Is Audiovox a bad company? I hardly think so. It's a brand most people should recognize without thinking too hard. At the same time they are highly exposed to the economy, declining sales of autos, and the yen. Their reported earnings and assets are also highly subject to GAAP spin. For a company with over a billion a year in sales to be unable to generate positive free flow cash without issuing stock and debt strikes me as unforgivable. There IS a reason I believe reading the filings is a critical part of not only value investing, but investing period. There are too many times when those who have read the filings are only too happy to sell their stock to those who haven't.

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