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

To: E_K_S who wrote (23513)	3/9/2006 7:44:41 AM
From: gcrispin	Respond to of 78958

From the WSJ WASHINGTON -- David Tepper is widely credited as a savvy investor in distressed companies, but observers have some advice for those considering emulating his investment in Dana Corp.: Don't try this at home. Mr. Tepper, who heads Appaloosa Management LP hedge fund, yesterday disclosed that he had acquired 22.5 million Dana shares, a 14.8% stake. Mr. Tepper, who made a similar bet last year on the stock of another company in Chapter 11, Delphi Corp., argues that Dana shares are potentially a good deal. However, Delphi has publicly stated that it is "highly unlikely" that common shareholders will recover any value from their holdings as the company progresses through its bankruptcy proceedings. Dana spokesman Chuck Hartlage said, "Our advice on our stock is to seek the advice of a professional investment adviser." Ben Silverman, research director at InsiderScore.com, praised Mr. Tepper's smarts, but argues that less well-connected investors might look elsewhere for a place to put their money. Mr. Silverman said, "This guy's a distressed-debt specialist. This is his game, and he likes to do some dumpster-diving down there." Even so, Mr. Silverman added, retail investors should be cautious about any company in bankruptcy. "It's a very risky bet for the average investor -- one that rarely pays off, if ever." Ben Branch, a professor of finance at University of Massachusetts who was co-author of a study on the stocks of companies in bankruptcy, said they generally aren't a good gamble. "We looked at what would have happened if you bought the stock the day after the bankruptcy," he said. "If you did that, for every dollar you invested, you'd get back about 30 cents. ...Close to half the time, you'd get nothing back." Mr. Silverman said that from Mr. Tepper's filings with the Securities and Exchange Commission, it appears that Appaloosa acquired the bulk of the shares on or before March 2 -- the day before the company filed for Chapter 11 bankruptcy protection. Mr. Tepper disclosed that he acquired 2.3 million shares March 2 through March 6, paying an average price of 95 cents a share. Mr. Tepper didn't disclose -- and wasn't willing to say in an interview -- when he acquired the remainder of his stake. "That question doesn't mean anything," he says. "Who cares? What's the difference? You own what you own. What's the difference when you bought it?" Dana shares dropped nearly 37% on March 3 after sliding steadily with bankruptcy looming. "If he had waited until it filed [for bankruptcy protection], he probably would have bought the stock for less," Prof. Branch said. "To the extent that he acquired the stock before the bankruptcy, then he paid more than if he waited." In the bankruptcy filing, the Toledo, Ohio, auto-parts maker listed $7.9 billion in assets and $6.8 billion in debts. Mr. Tepper argues that those figures position the company's shareholders more favorably than equity holders in other bankruptcies. "It's not necessarily the case that companies come out of bankruptcies and their stocks don't have a lot of value," he said. At the same time, Mr. Tepper acknowledges the risks involved. "It's a probability game," he says. Shareholders "could come out with nothing. They could come out with $12 a share."