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Friedman Industries, Incorporated Message Board

  • avdaugust avdaugust Aug 21, 2007 6:19 PM Flag

    not liquid stock/ good value

    the company has to dig it self out of a hole. prospects in
    this industry have declined and FRD is caught in the middle
    trying to improve margins. with the thin float once your in
    its hard to get out at decent price when you need the
    liquity. now will have to wait for new facalities to be
    completed. margins should improve as long as the economy
    doen't continue to slow.
    the dividend shoud be put on hold to use cash for expansion and construction. lets hope they can pull this off as nothing has been explained by management how they plan too complete plans. up until now, stockholders have been left in the dark. I believe that is why there continues to be an
    exit from owning this stock..the long term will tell if the value remains.

    it would be nice for management to release a statement.

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    • "margins should improve as long as the economy
      doen't continue to slow."

      Why? What you saw in the past quarter was shrinking margins as the cost of raw steel rose and the price of finished goods fell. Beyond that, a new plant with additional capacity means they need to increase sales tonage when it's been shrinking more often than not recently. If they really push tonage, won't they need to cut prices to move it?

      Let's not forget that they have been running on a highly depreciated facility base. A new plant will mean much larger depreciation expense which will impact earnings negatively also.

      FRD has historically given out almost no information other than what you read in the quarterly SEC filings. The shareholders are along for the ride here. The best way to play it is to buy when the insiders buy or get options. You might want to be paying attention to the fact that the two newest members of the Board of Directors have not bought any FRD stock yet and Tommy Thompson, one of the three executive officers doesn't own any either while the other two executive officers and the Friedman brothers have been selling.

      FRD isn't going to be sold anytime soon, so the dividend is the payment you get for holding this stock. The price of FRD got way ahead of itself in the nutty bull market of the past several years, due in part to growth in the dividend. Dawning realization that frothy prices will retrench, accompanied by a reduction in the dividend, perhaps accelerated by the growing mortgage disaster and construction pullback, will have the effect of pulling the price back to a realistic long term level.

      If DFA decides the bloom is off the rose, look for a big pullback based on any reduction in their holdings alone.

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