Take my temperature, I agree with DragonLZ (partially). RAS and ZALE
Sorry UltraLong, I have some macaroni necklaces that I made for you...I even shellacked them, but whack me with the cane anyway, I definitly need "recalibrated".......Some fun banter here with DragonLZ
Dragon uses "chart eyeballing". I like fundamentals and short term charting. When they match, then I start digging in for the next level. Of the three equities DragonLZ is testing his eyecharting LONG term, I tend to agree that Two of the three have some potential, although all three are speculative. BGP, RAS, and ZLC. I'm going to join him on the RAS and ZLC. I see BGP down over the long haul, but I'm not fond of downthumb sub $3 equity here on CAPS. Mr. Market can burn you short term on a downthumb from the lower levels where the percent change is rapid. TEN taught me some lessons!Here's my pitches on ZALE and RAS, I'll save my thoughts on Borders for another time. I realize earnings are Monday. That will either start their down spiral, my best guess is BAD, or give them a temporary upward momentum. If they get a temporary uplift it will just make the fall a little later.=======================================================So agreeing that ZALE Corp has some upside over the next 9-18 Months
, my premise on Zales's, a jewelry chain is that they indeed suffered and dug a deep pothole for themselves from the recession. Clearly they sell a luxury item and the economy tanked them. Over 1500 stores of various sizes and focus, from wedding to small padoga's and kiosks, is a lot of overhead in a bad economy. Three quarters of heavy losses and a slight "win" in the Christmas quarter, Zale's is living on inventory. Cash flow has allowed some debt repayment.
The Good: Cash flow and Inventory! Zale's book value is now a mere 0.34. Debt is 10X cash, but still manageable. While I agree that Zale's $740 Million in inventory most likley deserves some writedown and it's scattered in over 1,000 locations, overall it's an asset they can use to hold together while the economy turns. If needed they can reduce inventory. My take on diamonds is that they are overvalued as supply and demand is tightly controlled by a few stakeholders. This could be broken through, but so far seems to be holding solid. Gold/Silver have basically increased in value.
Weddings, a key source of revenue are down. Same gender couples unions/marriages may help with that.
Overall, I think Zale's has a good chance of growing from the $3.36 it is at now. It peaked this past year at $8 only 5 months ago. Past performance is no guarantee of future gains, but if I was going to make a speculative play, I'd rather do it where the inventory is measurable and has some promise. All that glitters is not gold and all that sparkles is not a diamond, but my rough cut on this one is that there is a glimmer of hope.
RAIT Financial Trust, RAS, as a REIT / financial is hard to value. Things can break either way, (acknowledging the obvious that sideways is NOT likely), but I see some chart activity that suggests that the speculators are speculating and adding to the play. I got off to a bad start on this one as I caught it on a market up day when equities like this have amplified upside....countered by amplitude downside on any down cycles. What goes up FAST can go down faster as speculating investors are often not loyal and generally chicken.
RAIT Financial Trust has a book value of a mere 0.21, but value here is subjective with real estate, especially commercial real estate. As an REIT RAIT needs to pay 90% of profit out as dividends, but loses have eliminated dividends except for on their Preferreds. Overall REIT's suffered greatly when property values crashed and leasee's evaporated. Being forced to pay out dividends reduces reserves and flexibility.
Overall, I give RAIT a decent chance of bouncing back. Loan covenents and leasee's are critical here. Few banks want to take over business's that are even slightly viable. RAS has been a money loser on paper for the last three years. Holding dividends gave them some relief. RAIT diversified slightly with more attention to their broker-dealer securities. Leasing is up somewhat in their multi-families. RAIT shed some losing property at a loss, but helped clean the books. Buyback of securities at about 30% on the dollar should help long term; lowering debt to equity from 5.4 to 3. RAS is trying to avoid foreclosing on tenents, but in some cases will have no choice. The multi-family diviision they just purchased is a new frontier for them, but I see some promise here. Those getting forclosed on in their homes and their credit wrecked for years need to live somewhere.
Risky, speculative, but fits within my risk/reward and while short term may be rocky, I think RAIT has some long term potential. IF any of the REIT's ever return to dividend paying status then a sub $3 entry point will quickly be returned.
Two speculative plays. Agreeing on two out of three finanicals, even for different reasons ain't half bad, although the end result could be ALL BAD.
I like DragonLZ's results and we have a good time bantering when we don't take each other too seriously. If Investing youself isn't fun and you're a sore loser then you should find something else to do. At least by agreeing, misery loves company, so we'll be in the same sinking boat!
Disclosure: Put my money where my mouth is, bought RAS at $2.03 Friday. Will probalby buy Zales unless UL gets ahold of me and whacks some sense into me.
TSIF The Sky isn't falling today, but my portfolio might be if I keep drinking DragonLZ's Kool-aid! :)