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Strategies & Market Trends : Turnarund Investing
NOVS 0.0666-16.0%Aug 1 5:00 PM EST
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To: thatsnotluck who wrote (557)4/26/2012 2:46:57 PM
From: Covenant1 Recommendation   of 1876
 
If you want to see something really ugly, take a look at ARL, TCI and IOT. These three value traps are under common control and have lots of related party transactions with each other AND with other entities controlled by the same control party.

The financial statements look fairly crappy for ARL and TCI due to consolidation. However, almost all of the real estate investments have non-recourse debt. This has allowed the company to extract more money out of the investments than they are carried on the balance sheet. As a result, the asset values on the balance sheets are severely understated.

IOT does not have a complex balance sheet, unlike the other two.

The companies are run for the benefit of the controlling shareholder. Public shareholder interests are not served well if at all.

I trade in and out of these companies. Liquidity is poor. They are all substantially undervalued and there is a good reason for this. Retail shareholders have no ability whatsoever to get a return. The controlling shareholder can extract money whenever he wants via related party deals. Public shareholders cant. Dividends were cancelled years ago and likely will never be reinstated. About the only way to realize value is to wait a few decades for the controlling shareholder to die, and hope that he didn't teach his heirs how to continue the family tradition of screwing shareholders.
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