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

To: Bob Rudd who wrote (15311)	8/24/2002 10:29:50 AM
From: David	Read Replies (1) \| Respond to of 78686

<<From a business standpoint...pencil manufacture hits me like textiles or broom making, something where it's going to be tough to compete with low labor cost economies>> fwiw: The company may be moving towards utilizing low cost overseas labor as it owns facilities in Mexico and Beijing. Pencils seem like a competitive market and a tough business, but Dixon Ticonderoga must be good at it by now <g>. Curious whether established customer base over the past (several hundred?) years with school districts and others might provide some advantage for Dixon compared to newer entrants. Many memories of chewing a Dixon and Ticonderoga during school days (some Faber/Castells too). Perhaps their art supply line and a Warner Bros. licensed Looney Tunes and Scooby Doo lines might distinguish them from no-name competitors. Past earnings seem to average around $1.5 million per year (excluding $9 million gain on sale of sale of its U.S. Graphite and Lubricants division in 1999) (the average, however, does not account for any Graphite Lubricants division earnings). Seems if things are turned around a bit the company could be trading at higher levels. What could make it trade at much lower levels? Obsolete inventories? Failure to restructure debt. (An aside: Recall reading a story about Armand Hammer owning a pencil factory in Russia at one time back in the 1920s. Not sure it was too successful a venture for him).

To: Bob Rudd who wrote (15311)	8/26/2002 10:58:39 AM
From: Bob Rudd	Read Replies (1) \| Respond to of 78686

DXT: When I made original comments on this, I had not run across the 'going concern' warning. This pretty much means, 'Stick a fork in it, it's done.' Analysts and auditors are suffering lack of credibility for assymetric reads on companies: Their analysis tends to be positively biased by relationships and financial incentives. This doesn't necessarily mean they are stupid or incompetent, just paid to express a more positve view than is sometimes warranted. So...when an analyst says 'sell' or an auditor issues a 'going concern' warning, they are swimming AGAINST the tide of bias based on considerably more information than the average investor will have at hand. Both are rare calls and should be given considerably more weight than positive takes. That said, there are times when the price overdiscounts even the most negative opinion. I just don't think that's the case with DXT based on debt adjusted valuation measures.