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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (8852)	11/2/1999 12:19:00 PM
From: opalapril	Respond to of 78628

SVM Looks like it has hit bottom.

To: James Clarke who wrote (8852)	11/2/1999 12:47:00 PM
From: Q.	Read Replies (1) \| Respond to of 78628

re. FRDM, it's a jewelry store chain in the South. I suppose only someone who's lived there would have heard about it. I feel uneasy investing in retail unless I can actually do the Peter Lynch thing and visit a store. Market cap is about 9% higher than indicated by MarketGuide, due to class B stock. Two issues I noticed in a quick glance at the 10Q: 1. The CEO is the controlling shareholder. With micro caps this is not uncommon, but it still makes me nervous as you can have conflicts of interest. Moreover, in this case the guy has done it in a particularly distasteful way: he doesn't own that much, but he does own all the class B stock, which gets to choose 75% of the directors. I don't like a governance structure that is intended to defeat the common shareholder, and that's what this is. 2. There is an asset that you might question: The co. is owed money by another firm controlled by the same CEO, and this other firm is in default. The 10Q argues why it thinks this debt is collectable, but it doesn't sound very encouraging to me. If you don't count this asset, the stock still sells below 100% net-net. Just the same, there's the prospect for some bad news. And you have to wonder at management's wisdom, and conflicts of interest, in borrowing money from a bank and then loaning it to a firm controlled by the CEO, when that firm subsuquently defaults. Well, all these cheap net-net stocks are going to have something about them that you won't love. You have to pick the ones that don't stink, I suppose. I would just say that the governance structure here weighs heavily on the smell scale for me.

To: James Clarke who wrote (8852)	11/2/1999 9:18:00 PM
From: valueminded	Respond to of 78628

James: Have been looking at friedmans for a while. (in fact mentioned it in a note to either you or mike a week or so ago.) At any rate they have some funky accounting having to do with a buy of crescent. Possibly up to a 25 million dollar right down of assets if it goes under. I will post more as I go through it. My biggest current concern with this company is to see that it is not so totally locked up with the insiders that they can act with disregard to outside shareholders. On a different topic. Do you still like USU and do you have any insight on the Russian SWU contract. This contract is my only concern as it appears to be capable of draining the cash right out of USU unless it is either renegotiated or they have an out and can drop it.