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Strategies & Market Trends : Value Investing
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To: Shane M who wrote (4095)5/30/1998 6:15:00 PM
From: Allen Furlan  Read Replies (1) of 78525
 
RE net nets from Shane Milburn.
Received your spreadsheets and reviewed company data from AAII data base of two years ago. For the benefit of the thread these were companies that had demonstrated net net properties in the past and to which a retroactive review was made. Three factors were used as primary screen ,free cash flow for each of preceding 8 quarters,current assets to current liabilities and long term debt. Only BELM had significant LTD. 8 of the 15 companies had negative cash flow in at least 5 of the past 8 quarters and were not considered candidates for purchase. Collateral data was also used,by comparing companies to peers(4 digit industry code used by AAII). These factors were P/sales, P/cash flow and Inventory turnover. Only 4 companies had 4 or more quarters of positive free cash flow and current net asset ratio greater than 5(arbitrary cutoff). Of these ESP was strongest but had inventory turnover which was only 25% of peer group and was eliminated. Only 3/15 companies seemed strong enough to consider,HBW,MAJ, and PSO.. None has performed well and in fact only 1 company(BELM)out of the entire list of 15 doubled since mid 96 (but then retrenched). Bottom line is that net net money was dead money for this small group of identified companies during this powerful bull market.
Having said this I plan to follow ASFN in the near term, not from financial considerations but because of a Washington Post article about dissident shareholders winning control of the board.
Best to all
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