Asta Funding Inc. (ASFI)

[bovverd]

Originally Posted by joshuat

I honestly don't know the answer to that at this point. We can look at their latest press release here: Asta Funding, Inc. - Investor Relations - News & Events - News Releases

Relevant quotes:





Sounds to me they got helped this quarter by the receivables valued at $0 on the balance sheet, and they will face some tough quarters ahead. Long term, things look good. Mr. Market is responding to the short term difficulties, and ignoring the future, IMO.

Sorry Josh that wasn't me demanding you answer the question yourself, it was more of a suggestion to a possibly key question in which to establish an answer for!

[tombrown1]

Originally Posted by bovverd

The debt has already been factored in Tom:

Total Current Assets: $570.05 Million
Total Liabilities $339.42 Million
Total Net Current Asset Value: $230.63 Million
NCAV Per share: $16.56
.

My mistake. Nice discussion happening here. I think we're starting to get to the root of the reasons for the 62% drop.

I do think this is a great reason to pay attention to the chart. If you had simply done your valuation, looked at the current price, and made a big purchase without looking at the current trend, you might have made a big mistake. But looking at the trend it is obvious that something is going on, and now you're starting to get to the bottom of what it is.

This is why Phil uses TA - because he doesn't presume to be as smart as all of the pros who are covering the business. So he does the best he can, and then covers himself with TA as an extra (admittedly profit-taking) precaution.

[bovverd]

Originally Posted by tombrown1

My mistake. Nice discussion happening here. I think we're starting to get to the root of the reasons for the 62% drop.

I do think this is a great reason to pay attention to the chart. If you had simply done your valuation, looked at the current price, and made a big purchase without looking at the current trend, you might have made a big mistake. But looking at the trend it is obvious that something is going on, and now you're starting to get to the bottom of what it is.

This is why Phil uses TA - because he doesn't presume to be as smart as all of the pros who are covering the business. So he does the best he can, and then covers himself with TA as an extra (admittedly profit-taking) precaution.

Tom - No disrepect intended but the chart for this or any other investment decision for me personally will never be part of the process I use. Recent buying, selling and volume data has nothing to do with any purchase I make.

I am simply trying to establish discrepancies in the two variable factors relating to price and value. The complexity of the underlying business of ASFI and the way their assets are determined is making this one a difficult one to nail down. There are many more investment candidates who are involved in much simpler business's that have much clearer asset classes.

Price and value is the key for me and nothing about charts Im afraid. Did Buffett need a chart to time his purchase of Walt Disney for 80 million when the business alone was valued closer to 400 million? No I dont think he did. Did Schloss use a chart to buy Lehman Brothers in 1994 fort less than book value and did he use a chart to sell it shortly after for a 75% profit? No I dont think he did. Infact I know he didnt because he never used a computer.

I am looking to buy business's for less than they are worth and the recent trading behaviour relating to a business has very little relevance to my investment decisions.

As for ASFI - Is the 62% drop more about market fear or a real issue with the underlying business? A chart will not give you the answer to this question.

Asset valuations are probably the most conservative method of establishing intrinsic value there is, hence the reason there are so few stocks meeting NCAV criteria during bull market conditions.

Nevertheless a very interesting discussion indeed. I personaly learn the most from these types of threads and that it essentially what its all about.

[tombrown1]

Sorry, I think I have helped to hijack this thread away from ASFI and more towards a TA vs. value investing debate (which usually has no end)!

Keep the discussion coming. I'm learning a lot.

[joshuat]

Originally Posted by bovverd

Sorry Josh that wasn't me demanding you answer the question yourself, it was more of a suggestion to a possibly key question in which to establish an answer for!

Oh, sorry. :)

The more I look, the more this looks like a screaming buy. This is the kind of market that is great for the future of the company. When economy is going south, people default on their debt. This creates a buying opportunity for Asta. Later, when the market recovers, people can pay off that debt.

It's looking yummy just based on performance of their current receivables. Factor in how they can grow if they are able to purchase great assets at rock bottom rates. Also consider that they outsource their collections business - they don't keep people employed when they don't have a lot of collections, keeping the CapEx low, and can easily ramp up when they have a buying opportunity, like now.

The big thing going on seems to be the large debt they took on in the Palisades purchase. They renegotiated their loan with their lender in December, which should enable their paying off their debt. Should being the operative term.

They essentially exhausted their line of credit with this loan, which means they won't be able to grow without securing new lines of credit. In essence, they are leveraged to the hilt. Furthermore, if the economy does slow, the default rate may go up, making this asset underperform.

However, they are essentially a very conservative company accounting-wise, and I don't believe they just went la-la and acquired debt that they didn't believe they could service. I think they saw value in what they purchased, and the market is reacting to economic news with "what if" worries. This is a business that depends on heavy cash flows, after all.

The other aspect to this is that they are free to sell their receivables at any time. In fact, they mentioned in the most recent 10K that they are looking into doing exactly that with the Palisades holdings to help pay down their debt faster. Of course, this depends on their finding a buyer at the right price. If things get tight, they can always unwind themselves from a deal, probably at a low to no loss.

ETA: the debt is at 170 basis points + LIBOR

[joshuat]

LIBOR is now 1/2 what it was one year ago. The cost of carrying that debt has gotten a lot lower.

I went in big on this this morning.