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

To: LauA who wrote (9658)	1/16/2000 1:34:00 AM
From: debrahaugen	Read Replies (2) \| Respond to of 78673

I smiled at your recent post on Cort and Buffet's understanding of technology. Buffet understands smart management and a quality businesses at a good price. Cort has a great business model and a talented management that was also smart enough to make a $3 million investment in Springstreet.com, which then merged into Homestore.com. Cort's September 30 10Q, showed this $3 million investment had increased to $18 million (HOMS was @ $40 at the time). Today, HOMS is now worth(?), but sells for $80+ (and would of course, be truly valued at market value less taxes which would be due on sale). Interestingly enough, this smart management team, carries the investment in HOMS as a marketable security on their financial statements and can sell 90% of this investment in February 2000 and the remaining 10% in August 2000. Very careful following of this company resulted in both AGONY and then ECSTASY in my portfolio. I loved the company and its operations and took a large position in the company as a long term investment last year in the mid-high teens. Then came the management buy out at $25 about six months ago, (not exactly how I expected to ride alongside citicorp venture capital (44% owner)and jointly monitize our investment). But I felt the company's predictable earnings, increasing cash flow, HOMS investment and a very low takeover price would assure a quick buyout and ultimately benefit management and Citicorp. Therefore I doubled up my position around $22.50, expecting to add to my profit with a little low risk takeover arbitrage. I thought having 60% of my portfolio in Cort would now be a great easy, no problem profitable investment. I seem to remember - a fool and his/her money are soon parted. A third party, Brooks, raised the ante when they stated publicly in a press release and over an internet chat that his firm was willing to offer $28 cash for Cort and had the financing arranged for the buyout with a reputable third party. I was ECSTATIC (more profit), but management and citicorp did not want an independent third party to take over Cort, and they refused to engage Brooks in discussions. Litigation and more delay. Citicorp also had the SBA looking over their shoulder quite closely because their investment was made in an SBIC vehicle. Great artcle summarizing Brook's position appeared in USA Today, about shareholders in small companies not being able to get a fair shake from management led takeovers, when shares of a small company are unloved and undervalued (using CBZ as an example). T Rowe Price - with over 10% of Cort shares,refused to go along with the management led buy-out. After much discussion, management raised their offer to Cort shareholders, not to the $28.00 cash which Brooks had tried to offer Cort, but to $25.50 in cash and $2.50 in paper. A few weeks later management claimed they could not arrange the financing for the buyout transaction. NO BUYOUT AND STOCK DROPS - no quick profit - rather a loss. What a mess and AGONY for shareholders (like me)who felt they had done substantial due diligence and then were blindsided by what appeared to be a great management, which had a very respected 44% shareholder, but who together appeared to place profit over a fair, just and equitable transaction for all parties. After expecting some quick resolution, and no action for the last six or seven weeks, with a stock now slightly below my average purchase price, I reluctantly placed orders this week to sell enough shares to bring my holdings down to a normal size position. Prudence over greed. My sell orders were placed around $17.50 but they were not filled and have now been cancelled(luck anytime over skill). Imagine my ECSTASY when I glanced at the recent news release, which said two of the greatest investors in the world (Buffet and Munger), agreed with my due diligence, and they were willing to pay a 67% premium to all Cort shareholders. I am sure the position became available to Buffet/Munger ONLY because shrewd investors like Citigroup and T Rowe Price, and an excellent CBZ management team, got themselves entangled in a position wherein they were unable to unravel the problems and resolve easily and equitably without extensive time delays and litigation expenses. So Buffet and Munger were called upon and they were able to add a jewel of a company to their portfolio at a very reasonable price and provide all parties with a fair, just and equitable solution to a difficult problem. Hope this background information provides some interesting insight to your post. Although I am sorry for such a long first post, I have lurked on this thread for some time, and was waiting for the right opportunity to add a tidbit of knowledge/information, and to also say THANK YOU to James Clarke, Paul Senior, Grommit, Michael Burry and the many other posters who have provided me with key insights and ultimately investments in several securites;including but not limited to, ebsc, cmh and pso. Deb