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

To: Don Earl who wrote (15954)	12/26/2002 10:38:28 AM
From: TimbaBear	Read Replies (1) \| Respond to of 78628

Don Earl Well Don, I really try to make my investment decisions based on more than an article in a financial publication. They may be correct in what they write, or they may not. They are journalists, trying to do a story that will sell copy. I posted the story as a pretty good example of what I have seen as the press coverage of the Armstrong reorg plan, not as an investment guide, although some I guess might use it as such. . You have no idea (no one could) where the stock might trade if it does eventually trade on a major exchange, or if a mystery strike on a mystery warrant represents a good value compared to the mystery future price of the new issue. I would suspect that none of us have the crystal ball which is clear enough for this kind of projection, and I hope that my not having one doesn't discredit me so much that anything I might say has no merit. I don't buy an interest in a company because I know what price it will trade at some day in the future. I buy because the cash flow I'm buying is cheap relative to alternative choices for capital employment. Of course, underlying all of that is the assumption that some day I will be able to sell the ownership interest at a price more fairly representative of the value of that cash flow. I have one of the Graham sayings embedded in my soul: "In the short run the market is a voting machine, in the long run a weighing machine." While this may not be the exact quote, I believe I captured the essence of the point he was trying to get across with it. I assume if you had found anything to suggest existing common get a share of the new issue, you would have posted it. There's nothing in the paragraph you did post that guarantees warrants will be issued, or at what ratio, or at what strike. Actually, this is not quite correct. There are some assumptions I make when reading the reorg plan. The first is that the court will ensure that those items contained within the plan will be enforced as part of the finalization process. This enforcement assumption gives me some confidence that indeed there is a guarantee of action according to the details contained within the plan. I will admit, that I am unclear as to what the number of those warrants will be, however that they will be issued to existing shareholders if the plan is adopted I consider is certain, providing that the existing shareholders vote to accept the plan (however, the plan states if the existing shareholders don't vote in favor of the plan, they'll get squat, so another assumption is that the shareholders will approve it). As far as the strike price of the warrants, it will be 125% of whatever the fair value of the company is determined to be by Lazard in conjunction with the financial experts hired by the asbestos trust. If one assumes they will derive a "book value" of sorts, then the warrant strike price will be 1.25BV. The term of the warrants is 7 years from the Effective Date. The reason I didn't post more facts, Don, isn't that they weren't there. It was because any written document is subject to some measure of interpretation by the person reading it, and I didn't want to color the facts contained by whatever biases I might bring to my reading of the plan. I have schooled myself to be extremely objective when reading financial documents, as have most successful investors, but that doesn't mean I have a "lock" on the "only true meaning" of any document. When I first visited this board back in 1997, there were frequent and heady discussions of the financial statements and their meaning. It was in that spirit that I posted this puzzle. I am not a proponent of investing in bankrupt companies or "turn-arounds". Your points regarding how the vast majority of them end up for those who hold any type of interest in them are good and valid ones. However, there are the rare occasions when value may discovered in even these situations. I always enjoy reading your posts and am not trying to upset you, but how about a reality check? I take my research pretty seriously. I take my public reputation equally seriously. I hope I have never posted anything on this site about any company that would lead the observer to believe that I deal in fantasy. I can accept if you believe otherwise. Timba