IPSU and different criteria...

[hitone395]

hello,

I have come to the conclusion that people value a stock by looking at the same metrics, P/E ratio, Growth rates, ROIC..etc...

I am not saying that is a bad thing. But if one wants to find a wonderful business shouldn't one stray from the pack?

I looked at Imperial Sugar...IPSU and found some interesting bits of financials..such as:

Price is around $14/share...Book value is $14.33/share...Cash is $7/share. So basically you are buying a $14 stock for $7...margin of safety??, Miniscule debt if at all.

There are some problems out there--such as the pending lawsuit due to an explosion at one of their refineries.

Just want to grab others thoughts who value stocks in a different way, that is all...I realize it is not a Rule #1 stock.

Hitone395

[tombrown1]

If price is $14/share then how are you buying a $14 stock at $7/share?

[joshuat]

Originally Posted by hitone395

Price is around $14/share...Book value is $14.33/share...Cash is $7/share. So basically you are buying a $14 stock for $7...margin of safety??, Miniscule debt if at all.

No, you are buying a $7 stock for $7, and then handing them an additional $7 and saying "here, manage this for me, I don't know what to do with it".

This is a company many are talking about have to file chapter 7 in a few years.

Plus, dig into it a bit. Sure, they have a big chunk of cash sitting around, but they also have an underfunded pension plan. Cargill, a competitor, is expanding capacity by 9% of the US supply. Industry insiders are suggesting modeling for historically low sugar futures. If the US ever cuts the sugar subsidy (our prices run over 2X the world prices), good luck (hint, look at the NAFTA sugar duties phase out as of 1/1/2008).

What is your model for the stock price? Sales, gross margin, SG&A, and D&A? What stock price does that get you? Once you get that number, we can talk margin of safety. Me, I'd be shorting the stock if I wanted it in my portfolio, but that's just me. This is not a company with a rosy future.

[Roger Jones]

Why does the model have to be in stock price?

Wouldn't a margin of safety have to do with what is on the income, balance and cash flow sheets,not necessarily stock price? So if something does happen they have the cash and ability to withstand problems. And the greatest DCF evaluation could be something to behold with excel spreadsheets and at the same time be completely wrong. Also if IPSU gets bought out by a competitor, wouldn't they have to factor in the 200 million they have in tangible assets? So that would make the market cap larger than what it is, which would increase the price of the stock.

Maybe I am wrong and don't completely understand. That is ok.

But even Peter Lych said that if you find a company selling for $20 with $10 a share in cash....buy it. I am certainly not Peter Lynch and maybe I misunderstand his quote.

Nonetheless, thank you for the input and I will do more research into this.

[Gunnski]

Oh my gosh! I hope you are using barbless hooks while your bottom fishing! This is certainly catch & release material. I smelt burnt asbestos when I looked at this chart. The brakes still have not activated on this nosedive.

Try looking at CPO if you really are serious about this sector. Right now it is consolidating for the next move up.

[joshuat]

Originally Posted by Roger Jones

Maybe I am wrong and don't completely understand. That is ok.

I think we misunderstood your point somewhat. Certainly having a lot of cash on hand provides the company with a margin of safety, in that they can better survive hardship than a company leveraged to the hilt. The way you worded your post it sounded like you thought the $7 was giving you an automatic 50% margin of safety. The 50% margin of safety that Buffett and others use refers to the stock price vs. what you calculate the stock price should be. Naturally that price will take into account whatever cash and other liquid assets are available.

So yes, having cash on hand is good. But make sure it is a sound business. I'd never buy just because there is a lot of cash on hand.