Gary:
A couple of years ago, I spent far too much time digging into Cott Beverages. It was outside my tech sector zone, but an important client wanted to know our thoughts. To make a long story short, I got hooked on the situation and really dug into it. While every analyst in N.Y. was calling it the "second coming", I called it an accounting scam and printed over 100 pages of research to back up that point of view. The stock broke shortly thereafter.
Coke has little love for this company, and has been in a serious battle with Cott. It hasn't been an inexpensive battle for either of them. Cott is just about finished, as they have always sold their products below actual all-up cost. This was masked by some of the most brilliant accounting I've ever seen. The difference was of course supplied by Wall Street, through both equity and (big) debt issuances. Now, the company is approaching the abyss, and will experience beaucoup problems in finding more dough. The debt is overwhelming.
Aside from seeing it as an excellent prospect for our "mortally wounded" strategy (see earlier posts), I will probably have a tiny smile when it finally rolls over and drops into its well-prepared grave. I took a bunch of heat (and worse) during the period when I was the sole bear and all of Wall Street was in love.
The impact on Coke's numbers, once Cott caves in, will not be consequential, but it will help. Not that I would buy Coke at these insane numbers. (g)
Best, Earlie |
