Timba and all,
I don't want to get too carried away with discussing VOXX since while I don't think it would be a terrible investment for someone else, it doesn't fit the kind of profile I usually look for. On your comment about AR, it looks like they had a large prepayment that got shuffled around as unearned revenue and the amount was added to AR even though it's already been paid. Things that can be done, and are done, with GAAP never cease to amaze me. Actually, days sales outstanding was one of the few things that impressed me with VOXX. It looks like it usually runs at around a month. My only real objection, and for me it's a big one, is the way they spin their numbers, plus cash flow seems to come mainly from selling stock or debt. If I see a company spin the numbers even a little bit, in my mind it casts doubt on virtually everything else on the balance sheet. There are so many companies with very clean balance sheets to pick from, that I don't waste much time looking at those that play games with the numbers.
My focus is normally on potential turnaround situations where a company has a clean balance sheet, with little debt and strong cash positions. The time I broke that rule, the company went Chapter 11 and it pretty much cured me of looking at book value where cash isn't a large part of assets. It also caused me to look a little harder at management. If they're crooked and the only cash laying around is yours, they'll figure out a way to get it. My theory is that a company with lots of cash can weather a temporary downturn in their industry and stage a comeback when conditions improve. Especially if they don't have a lot of debt to service. I also believe if management has fairly substantial positions in the company, they can't cheat shareholders without shooting themselves in the foot.
Like Bob recently mentioned, there's usually a reason the price of a stock is down. The trick is deciding if the reason is good, bad, overdone, temporary, or permanent. IMO, one of the best places to look for value is where an entire sector has been hammered to death on negative sentiment. Perfectly good companies get clobbered along with the bad ones, and it usually isn't that hard to figure out which is which. I also think it's a lot easier to get a feel for the quality of management when things are bad than when things are good. When market conditions are perfect, a chimp could run the average company successfully and no one would know the difference.
This is kind of off the topic, but I was cleaning out my bookmarks and ran across this item. geocities.com I figure I may as well post it someplace to justify not deleting it. |
