Where would we be without Barron's, that prescient weekly that has led us into many an ambush, and prompted me to sell some stocks way too soon. I look back and remember their bearish stories on Microsoft a few years ago, their pounding the table on MA/Com just before it went into the toilet, their touting of (the late) Penril which cost me more than a few bucks, and, oh yes, they even warned that Anheuser Busch (BUD) looked a little toppy a little over a week ago. Got a few profitable trades as people dumped the stock down to 68, only to have it recover to 76. These days, I almost regard Barron's as a contrary indicator. If they are pessimistic on PZN, that can't be too bad.
as this board. Nothing new except what I thought as somewhat postive, that with all this fiasco they're only looking at 9.75% or up 1/4-1/2% on the bond issue. Certainly not good but better then I was fearing.
But I was informed CCA would have NOT been an investment grade credit. We have 2 offsetting factors, the larger BV verses no retained earings. I don't which more beneificial for credit buyers. CCA of course was trading at 5 times book value. PZn is now trading less then the construction of it's prisons. (47k*$39,000/bed) Even Paine Webber estimates, the construction cost of a bed is in the $35-40k range last time I read a report talking about this.
If history is any guide, the stock price will move up Monday just like is has every time a negative report hits the mainstream press. Why is this? My guess is that just like the 60 Minutes piece, there is nothing in there that current PZN shareholders don't already know. No existing PZN shareholder will sell becauseof this article. On the positive side, the article sparks some interest from potential bottom-fishers. Just my theory though.
To Barron's credit, I thought the article was fairly well written. Yes, they cite Analysts who are concerned about "another shoe" and are pissed at management. The article did point out "former" shareholders. Well, I would expect former shareholders would have this concern; that's why they are former.
I suppose the article could have been more balanced and pointed out that despite the short-term challenges, business is absolutely booming both in terms of quantity and high-margin business even if the bond carries a higher rate. But regular Barron's readers know that's not their style.
Net-net, personally I found it comforting that even a critic said the dividend would be earned next year. Granted, they are coming up a little short of earning the dividend this year but at least they are savvy enough to know that from a PR standpoint they can't cut the dividend.
Basically, I bought a stock on Friday at 13 3/4 that even the critics agree will make and pay at least $2.20 a share next year. Wish I hadn't bought those shares at 23 but if I look at the yield on my weighted-average shares, I like what I see.
Cleo, notwithstanding Flipper's usually reliable contacts, I find it difficult to believe that CCA's bond rating wouldn't be on the low end of investment grade. Even the agencies cited the 95% payout requirement as a concern/negative. That particular argument seems like a tough one to make but its also an argument that doesn't really matter because what's done is done.
Since I'm posting anyway, I'll repeat my contention that management open up OPCO's books. The upside is we assuage some of the very real concerns out there. I must be missing something because assuming everything IS on the up and up, I don't see any downside for PZN or CCA.
Flip, MK, General, Nic - please tell me what I'm missing here.