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Hutchinson Technology Inc. Message Board

  • svenkarls1 svenkarls1 Jun 25, 2014 12:32 PM Flag

    longtime lost big on COCO?

    wasn't aware of this until now.. Just had a good belly laugh outa that one. Longtime simply does NOT realize that not all book value has value.. Longtime must have sniffed out COCO by being under book value (similar to Hutchinson).. HOWEVER when most of ur book value is property/equipment and goodwill, it is likely these things are overvalued on the balance sheet. Same here with Hutchinson, the book value says about $110 Million but most of this is property and equipment, which could very easily be only worth 50 cents on the dollar.

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    • It wasn't that "the book value didn't have value" with COCO....it's that the government decided it had had enough, and had state attorneys general breathing down its back, and decided to shut COCO down suddenly. That really fouls up any reasonable expected value scenario one had with COCO, because the game of musical chairs suddenly stops. I estimated the risk of the government doing such a thing as much lower than it was. I partly made that assumption based upon the fact that, last fall, the government "waived coco through" on the financial sustainability ratio, and did NOT require a posting of a letter of credit. Unfortunately, things changed drastically, since then, and "the powers that be," including, i believe, the POTUS himself, decided it was time to "make an example" of "the worst of the worst" of the for profit colleges. In restrospect, Leon Panetta getting on the board of COCO, and then off, 3 months later, may have been the canary in the coal mine.

    • HTCH isn't a buy because of the book value, all that Hutch bv provides is a small measure of safety, very small. HTCH is a buy due to the revenue and EPS growth that is underway. Industry dynamics in their favor on multiple levels. One that no one considers is the degree of consolidation that has occurred in Hutch's space over the last decade and what that means going forward. As it did for the drive guys, it will do for the suspension guys.....as long as Mag or NHK or HTCH gets taken out. Consider what would happen to HTCH stock if Seagate decided to buy Mag or NHK.....or if WDC wanted to buy Hutch. Point is, for the shareholder, two suspension suppliers would be infinitely better than one. A smart PE firm could buy two of the three and mint money with an IPO in about 3 years.

      But again, the reason to buy is revenue and EPS growth....it will be steady and relentless over the next several years.

    • My post has nothing to do with LTF, but I've noticed that more than a few investors who made most of their nest egg as a result of buying dirt cheap, high book value stocks between late fall 2008 and spring 2009, and then selling when valuations regained some degree of sanity, are finding that "book value" alone doesn't quite guarantee success. There is an equally important "qualitative" component not reflected on a company's balance sheet than must also be considered. It seems many of the class of investors I'm referencing here don't know how to do that.

      • 1 Reply to microcaptrader
      • Perhaps what you "notice" isn't reality? It doesn't take anyone long in the market to realize that book value alone is only one metric, and that metric can become meaningless in a hurry. Take any of the dry shippers...huge book value, but those ships are worthless if they have nothing to ship.

        That said, looking at, understanding and requiring solid tangible book value in a company is a valuable metric for investors. As much as you want to call out long investors who have suffered losses using book value as a tool in investing decisions, I can find you 10 fold investors who rely on momentum or technical analysis who have lost more. Book value is just a tool, but it should be one of many for investors, and the nature of the book value should always be understood.

 
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