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leaderoftheback (68.89)

Risk; reward; human nature

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October 17, 2007 – Comments (2)

Checked in on GBT, formerly ABAT.OB, and Hall9999.  What an interesting game this is and what fun and interesting players!  For me, the best learning has always come through the mistakes of others.  After a while, sharpening up that BS detector, certain themes come into focus.  It is very tempting to invest emotionally of course, which is what most if not all of us do in the beginning.  After a while I start to see things less clearly.  I do however begin to "feel" more acutely.  The feelings can't necessarily help me pick a winner nor avaid a loser, but it certainly helps.

There are so many red flags on GBT that I can see nothing but.  First, China.  The amount of money in that country looking for a home is pressuring stock values very high.  Ultimately, a company is worth only what the market agrees it's worth.  Theoretically, a company's value is it's book, but if push came to shove, true value is far less.  This is a well constructed game of gambling and as long as we're clear on that and all wish to continue playing...

Second, exchange standards; far looser on AMEX than NASDAQ or NYSE .  Why would a company choose AMEX?  Perhaps their reporting is not so good.  In some discussions around the stock, it is quite obvious that this is true.

Third, The underlying battery business is far too capital intensive and competitive for a company without disruptive technology to make real headway in such short fashion.  ULBI is an established company working like mad to build a respectable business...heck, you can even find a real product on the shelf at CVS.  Where can you buy anything from GBT...or it's subsidiaries(?!)

Fourth-  subsidiaries!!?...what the heck does a teeny tiny little company have subsidiaries for?  Can you say "Shell Game?"  I have owned many companies through the years who have subsidiary businesses beginning with Gulf + Western in 1976 and ending with ADSX today.  GE...they can have subsidiaries.  GBT and ADSX?  nah.  Really, what is the point of having a bunch of businesses, related or unrelated?  For a large cap it's like being it's own mutual fund.  For a micro-cap, it's like trying to look bigger than you are.  How about they just put their heads down, get to work, grow the business in a responsible manner and make a living for themselves.  If Wall Street catches on, fine, if not, they shouldn't care.  Then when Wall Street does catch on, you'll have an EML...a company deserving of every bit of excess value the market offers them.

oh, and lastly, we're in a positive market environment, last couple of days notwithstanding.  This is especially true of China.  In a positive environment more stocks go up than go down.  So you're shooting fish in a barrel.  It's all well and good to play the game, but know the rules, human nature and the nature of the fire burning at your fingertips.

and last lastly, if Hall9999 reads this, I AM NOT BEING CRITICAL OF YOU! Your picking style is like so many who use real money.  If the game is going to be of any value to us, we have to realize that this is not church.  Rock on 99, and I'll be watching how it turns out for you (over time). 

 

 

 

 

 

 

2 Comments – Post Your Own

#1) On October 19, 2007 at 1:30 AM, hall9999 (99.53) wrote:

  Yes I am reading this and I didn't think you were being critical of me.  Actually, I read most of the blogs that are posted although I missed this one yesterday (there is something to be said for a more captivating title).

  I agree that one should be cautious with a stock like GBT but I disagree with some of your red flags.

Valuation - GBT has a PE of 37 and given their growth rate (not just the past quarter or two but the past three years) a forward PE in the low to mid teens.  ULBI has a forward PE of 20 and that stock hasn't run up as much as CBAK or GBT (which is why I added it to my CAPS portfolio recently).

AMEX standards -  True the requirements for listing are a bit lower - market cap, stock price, etc. - but I believe most of the key filing requirements are the same - 10Q, 10K, 8K, etc.  There are legitimate reasons for choosing AMEX over NYSE or Nasdaq (it's cheaper for instance).  What part of their reporting is not so good?

Hard to make quick headway in the battery business -  I think you may be taking a too-narrow view of the business.  It is more than low-margin commodity products and trying to take market share from Energizer.  GBT is an OEM company (except for their miners lights) and they have only just recently entered the U.S.  I guess if you want to use one of their products you are going to have to move to China.

Subsidiaries - I think this has more to do with how the company was formed than with "trying to look bigger than they are".  You can tell how big they are just by looking at revenue, income, etc. 

  My picking style is like many others?  Darn.  I thought I was the only one using the "dart board" strategy.
 

BTW - thanks for adding me as a favorite.  That red heart charm warms MY heart more than any other. 

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#2) On October 19, 2007 at 8:24 AM, leaderoftheback (68.89) wrote:

Thanks you for that comment.  I really agree with everything you say, and that is the precise nature of the risk.  I'm not sure how many different securities are out there that we can buy, but there are plenty of them that are a good deal more transparent than GBT.  Perhaps the GBT managers are fine, moral and upstanding people, but in the capital markets one is guilty until proven innocent and of lesser ability until proven otherwise. 

<> We all have to have reasons to reject certain securities.  Robert Nardelli is a huge reason.   I came across a company called Smart & Final in my current work.  They were improving their profitability so I checked them out.  The CEO's name, Ross Roeder, rang a bell and it took me a while to place him as the head of Fotomat, where I worked in the 70's and 80's.  <>He ran Fotomat right into the ground, my employee stock purchases became worthless and I've never forgiven him.  I routinely read old bulletin boards to get a sense of a company and S&F was run from an ivory tower, just like Fotomat.  So then, that was not a stock for me.  Of course, I could have made a lot of money  on S&F, but I'd only be 50/50 with Ross Roeder.  In any case I need to do better than that, and certainly can.  This is why I'm high on companies like STKL and LWAY.  They are not exactly cash machines yet, but they are laying the groundwork and doing it in a transparent and measured way.  It's why I'm so annoyed with ADSX.  How would you feel if a company gives a nice severance package to its CEO so the CEO can go head up a subsidiary of the same company?  Mind you, this is a business that has returned nothing to shareholders but a lot of press releases (I'll rant about press releases one of these days, and also management salaries).  ADSX may turn out to be a money maker, but it's not a stock I'd choose anymore.

But back to GBT...none of us has any way to know what this company looks like on its home turf, but the home turf looks a lot like the wild west.  One should expect the spawn to resemble it's parentage.  There is a lot of money going to be made by somebody in GBT and that money is going to come from somewhere.  Miner's lights are a start, but until there is something concrete and some verifiable history, proceed with extreme caution...and beginners should just plain stay away.

I'll close with a note on the subsidiary thing.  Again,  we have to find reasons to reject stocks, not buy them.  One streamlined company doing one thing well is the ideal starting point for any business.  Each break-off will require a different type of attention within the corporation, so accretive benefits must become the focus.  The likes of ADSX, which has a whole bunch of unprofitable businesses...well, what's the point?  Look at EML, an old well run company that got into something that was within their skill set and vastly improved the company profitability.  That's the benefit of subs.  ADSX, GBT...no.  EML, Hathaway, GE...sure.  From that viewpoint, go ahead and evaluate Mr. In-between.

All the best...I'll be keepin' an eye on ye! 

.

 

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