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Strategies & Market Trends : Value Investing

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To: bruwin who wrote (56964)	2/22/2016 2:05:44 PM
From: E_K_S	Read Replies (1) of 78744

Look at how they value their inventory. Much of their inventory are legacy products that have little to no value other than to support current customers. Those items may/will be written off for salvage value too. As a result BV will drop significantly (probably $for$ on amount written off). Compare this to TAL and/or TGH and their BV (selling for 50% of their tangible book). Their containers (even their old ones) hold their value and when sold after fully depreciated, there is an active secondary market where many times they make money. TGH +55% in last 11 days as it got way too oversold and their revenue streams continue to grow (YoY +1%) adding to their FCF. Typically TGH & TAL assign a small useful life to their containers 7-10 years (for depreciation) w/ many of these staying in service past that period if/when secondary market auctions are soft. Recently, depreciated containers are getting a high price when auctioned since the steel structures are used for homes. So you have to look at what composes the BV. Intangible assets and legacy inventory not very good. Hard assets (like real estate and some commodities) used in the secondary market may/could be under valued. A lot has do w/ if there is a liquid secondary market for the items. I own STRL that is selling below their BV and a large part of the BV is from land and construction equipment. Both have a pretty good secondary market if there is a fireside sale. Also, those assets can be used to collateralize bank loans. If/when the prospect company gets those bank loans (ie JCP and/or Albertsons and/or Macy's leveraged their company owned real estate) , then it becomes a wasting asset fi no immediate exit strategy exists. EKS

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