What kind of investor would purchase preferred stock in a company that is in default on their notes and debentures? And also has a "going concern" warning in the auditor report. Not to mention unfunded pension liabilities that the government is increasingly concerned about. Or the fact the company has taken egregious losses for many years now. A company that is basically a welfare program for its management structure. You would think that any investor, no matter how impaired, could find a better place to invest their funds.
I am waiting for $6 per share, but there seems to be a hold up at $14 and change. If GS is right, we should be able to get it for $6 a share.
To summarize, the company is lying but their accountant is telling the truth. Note that Yahoo is using the accountant figures in their tables, not the company figures.
Well the company managed to completely destroy its Norwalk operations, both engineering and production. Also, it gradually liquidated all its assets over time to support ineffectual management that was nothing more than a bad joke. But what keeps the company going are income from the remains of its lease base of older products and income produced by the Fair Play acquisition, which had a modest but fairly steady market base. I could list the number of mistakes the company made over a 20 year period but it would take pages of typing and what would be the point? Trans-Lux is just a ghost of memories past.
My prediction based on the steep decline and the recent high price of $30 would be 20 percent of $30, or $6.00. This level should be low enough to force the margin hands out and any other weak hands. JDR said don't buy until there is blood in the streets, and $6.00 should be low enough to draw blood. Plus $6.00 is a price nobody would believe. The volume at the bottom will be 3X to 4X normal, maybe more as the panic spreads. The volume will announce that panic conditions are occurring so watch the volume carefully. It will take nerves of steel to go in and buy when this happens. There will be some doubt expressed as to whether the company can remain viable. These rumors will help feed the panic when it comes.
No reason to buy just yet as we have not seen panic selling. Wait for the panic. A small position will help maintain ongoing interest in the stock until the panic occurs.
Interesting, the market is off over 300 points today yet FF is up 5.7 percent. Someone is in there buying with conviction.
Here are the Specifics: The headline says "Strong adjusted EPS of $0.56, a 22 percent increase compared to prior-year period" and that is a direct quote. But what all the real earnings, the earnings that are the result of legitimate accounting principles? You have to read down a lot further to get the real earnings which are a loss of $0.94 or minus $41.8 million. That is why I call this earnings report a fraud and the figures back up my statement. This problem of issuing false reports has existed since the Enron debacle. Black Hills was using Arthur Anderson for accounting and engaged in the same type of practices that Arthur Anderson was using for Enron. As Enron collapsed, Black Hills management issued a statement staunchly supporting the use of Arthur Anderson and insisting that everything Arthur Anderson was doing was legitimate and reliable. It was only when Arthur Anderson collapsed and was dissolved that Black Hills was forced by circumstances to engage a new accounting firm. Since then they issue two earnings reports, a two for one deal. The first of these reports is the doctored headliner, it sounds so good, the company is doing great. But the real GAAP report from the accountant paints a severely less rosy picture, a picture of a foundering and deceptive management. At this rate of earnings "improvement" the company could wind up on the rocks, just like Northwestern Corporation did, and yes, I was there when it happened.
An interesting article yesterday pointed out that the actual cost of Saudi oil is much higher than the lifting cost. While it is true that the lifting cost might be $5 to $8 per barrel, the oil must be transported to where it is refined and used. Whereas the transportation costs for the Saudi oil is high, the cost for MRO is low due to the proximity and availability of the appropriate infrastructure. Saudi Arabia now makes use of extensive waterflood techniques to maintain production. Waterflood is a tertiary oil recovery technique and indicates that replacement of Saudi Arabian production capacity may not be so inexpensive in the future. The fact that Saudi Arabia has approached the marketplace with a $27 billion bond offering is an indication that all is not going well for the kingdom. Also note that spare capacity in the production of oil is only a few percent, not a wide margin as it was in the 1980's. Add to that the potential for disapproval of the Iran deal and the case can be made for a sudden spike in the price of oil which will catch everyone by surprise - well almost everyone. I would recommend limited entry into an MRO position at this time, but no more than 20 to 30 percent of an anticipated total position.
This company has a lifting cost per barrel of $14 to $16. It is very hard to go bankrupt if oil stays above $40 per barrel, especially since improved efficiencies can drop the lifting cost even lower.
This sell off is not so unusual. Years ago I bought some stock in a promising small Colorado oil company at $15. The company did well operationally, but because of oil price fluctuation, the stock dropped to $7.50. I bought more. The stock continued to drop to $3.50. I bought a lot at that price because I knew the company was good. A short while later the company was taken over at $7.00 per share. Though I lost money on my first 2 purchases, the large amount I purchased at $3.50 allowed me to make a handsome profit. That is how this game of chicken must be played.