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

To: Grantcw who wrote (35213)	8/22/2009 10:59:27 PM
From: Paul Senior	Read Replies (3) \| Respond to of 78751

Cwillyg. I have ACTS but am wary that it might not be safe. The article's author states: "My list of net cash stocks that I like is down to just three names. I have owned Silicon Graphics, Actions Semiconductor and Adaptec for most of the year and I expect to own them for a long time to come. I would have to check the history books to be absolutely sure, but I do not recall ever losing money on a stock that I purchased for less than cash on the balance sheet and I do expect to lose on theses three." My experience with these below-cash stocks is different. I agree a buyer of these types should expect to hold a while. More like three years than one year. However, I am one who certainly has lost money on stocks I've "purchased for less than cash on the balance sheet". Some of these entrenched managers just keep draining assets. Secure in their jobs, they just keep collecting their salaries and riding these cigar butts down into the company's death spiral. For some stocks I've held, eventually the cash gets consumed, or the cash amounts will fall so far that the stock price gets to be above the cash/sh value. At which point the margin-of-safety takes a hit in my view, or my ruling reason for buying disappears and I decide to just take the loss and move on. Fwiw here are some cigar-butt cash-rich or asset-rich stocks I am holding now: WNMLA.PK. Sum of its parts is worth more than the stock. Is what I believed when I bought the stock 10/06. Still may be true although the stock is about 50% lower now. TRID. I was warned about this one by Jugis Bekepuris, who's been right so far. Buys from 12/'07 to '09, my cost basis is $4.01 (always buying with stock below cash/sh). Stock is now $1.84 with cash/sh. down to $3.06. I am holding on. ASCMA. In at $24 in Feb. when it sold for under cash/sh. Cash/sh has fallen to $22/sh (per Yahoo); stock price though now has moved up to $27. I am holding on. finance.yahoo.com ACTS. Below cash/sh. I am holding on. Just a very small bet. AFOP. Stock at $1.03/sh with cash/sh at .93. Both above my purchase price. I am holding on. GAI. Have shares from '06 with several adds this year. My cost basis $9.06 with stock at $8.64 and cash/sh. about $9. (I believe I read that cash/sh is about $9, not the $13 that Yahoo shows.) I'll continue to hold shares. ADPT. In again for another try with a buy in May for a small amount at $2.84. Stock now $3.01 with cash/sh $3.19. (Have somewhat heeded cautionary note from Jugis Bekepuris about this company's lagging technology; so only a very small bet for me.) FACT. $10.26/sh net cash. Stock at $10.99/sh. I'm in for a very few shares since May at 9.09. In my view, from the little I see, this thing is a cigar butt with no earnings and very little public history. How somebody like Baupost's Margin of Safety guy Seth Klarman can find his Margin here, I do not really understand. I would be presuming this biotech company would just burn through its cash like so many others. (ie. no margin of safety just because it shows now a high cash/sh figure) I'm in because of the cash/sh and because I'm just trying an experiment to see if I can ride this guy's coattails. If stock drops under 10 on no adverse news, I'll just add a few more shares to my "speculation" (which would be an "investment" for Mr. Klarman since he's done all the research.) seekingalpha.com

To: Grantcw who wrote (35213)	8/23/2009 1:59:28 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78751

I own some ACTS. On one hand the company buys back shares. On the other hand, it makes about 7.7M share dilution for their employees (sorry, can't find the reference anymore). And they are losing money right now with unclear future. IMHO, it's not a buy, it may be a weak hold. I am holding it partially because I don't see much better ideas right now. Overall, my philosophy is to buy only (marginally) profitable net-nets. Money losing net-nets usually continue to lose it until they have no more. There are some exceptions to the rule but not many. Couple other rules: - Avoid perennial net-nets. Usually if they haven't found a way out in 2-3 years, they never will. - Definitely avoid biotech net-nets unless you know how to invest in biotech, which is completely other set of rules compared to regular investing. (Chinese medical companies don't count here, since they are usually distributors + nutrition companies, so they don't operate in USA biotech model). - Avoid obsolete or near-obsolete technology net nets. If they could not figure out how not to become obsolete, they won't figure it out now. (There are some exceptions: KONG and HRAY did very well, but then they are Chinese companies with opportunities appearing even if tech is rather obsolete). - Avoid distributor, 1-2%-margin net nets. 1% net margin IS the reason why they are net nets and they won't change. Of course, with all these rules, you may guess how many net-nets I can find to buy usually. Right. Zero. :) Take care.