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.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (218487)	2/3/2003 6:39:37 PM
From: reaper	Read Replies (1) \| Respond to of 436258

tip, not to be an arse, but you would agree that if BZH traded at 25 cents a share it would be below intrinsic value, no? i mean, their land portfolio and the existing inventory of (already built) homes has SOME value. management has a choice. it can take the cash flow derived from its existing asset base and (i) invest it in new assets; or (ii) return it to shareholders. we all seem to agree that BZH, at the margin, should be taking the cash flow that it is generating by selling its existing inventory of land and homes and giving it back to shareholders, and NOT using it to buy more land and build more inventory, as the marginal returns suck. what we are all dis-agreeing on is what the current asset base is worth. she thinks it is worth a lot, we think it is worth less. AND, in our favor, if BZH continues to re-invest its cash flow at shitty returns then they could, over time, erode away all their intrinsic value (which is essentially what Enron and KMart did). but if they just shut the company down today and liquidated it, it would likely generate $30-50 bucks in value (tangible equity is about $500mm, if you think the goodwill is value-less; that's $40 per share). now, i will say that her logic is completly inconsistent in that she thinks (i) the company should trade at a premium to book; but (ii) the company lacks attractive investment opportunities and should therefore buy back stock instead of re-investing in the business. this of course is a nonsense solution set; for a company to trade at a premium to book means that it has attractive re-investment opportunities for cash flow. so this particular analyst clearly did not do well on the logic portion of her LSAT's. i was simply commenting on her opinion that Beazer should buy back stock given its crappy returns, which is a correct assessment. her assessment that Beazer should trade above tangible book is, IMHO, (i) incorrect; and (ii) inconsistent with her view that Beazer lacks attractive re-investment opportunities. enought of this man. way too many words. let's get back to... gold sucks!!! Cheers