Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: - with a K who wrote (14509)	5/21/2002 3:33:37 AM
From: Don Earl	Respond to of 79023

<<<What do the shorts know that we don't know?>>> I took a quick look at the last 10Q, and ALD looks kind of twisty. I'm not a big fan of seeing preferred outstanding as it usually turns out to be debt that doesn't go on the balance sheet as debt. In the case of ALD, it looks like an extra $80 million worth. It also looks like there's about $200 million in notes being counted as assets which they are not receiving payments on. A big chunk of their assets are in junk bonds. The majority of their assets are unregistered securities which don't have an active market, and are valued at management's "estimates". There's a ton of debt coming due over the next few years and it looks like their favorite way to raise cash is to dump a lot of stock. I'm not convinced it's the perfect short play, but there are enough red flags where even a little bit of DD suggests it's a good one to avoid for anything long term. The yield is attractive, but the assets look flaky. Companies with reasonably clean balance sheets tend to have fairly brief quarterly reports. When you see a 10Q the size of a full length novel, it suggests the company is attempting to bury the bodies in a paper storm. IF/when the class action attorneys show up, the company proudly points to the filings and tells them "it" was fully disclosed on page 487. Reading a Yahoo profile is NOT due diligence. All publicly held companies should be considered guilty unless the SEC filings give them a clean bill of health. ALD doesn't pass the smell test. The short money is almost always right. The short money is also almost always early. I seem to recall seeing a trading strategy mentioned where the idea is to go long on high yield stocks just long enough to be a shareholder of record for the dividend, then bail. If I'm not mistaken, there is or was a message board devoted to the topic someplace on SI. I've never tried it myself, but the theory sounded interesting. ALD might be worth tracking to see if that kind of approach would work on it.