Wednesday, September 16, 2009

Lousy Analyst Coverage in ACAS Still

After Monday's 20% up-day in ACAS, The Motley Fool ran an article "Monday's Biggest Stock Stars" touting ACAS' gain as having been "predicted" by Fools participating in the site's CAPS stock-evaluation system. (Some of those who give ACAS a thumbs-up in CAPS have loved ACAS since it traded in the $40s.) ACAS, it seems, is a four-of-five-stars stock -- "Approaching Greatness". However, The Motley Fool's early edition of the article said a reason to own ACAS was the confidence inspired by its dividend. That argument certainly sounded good last year, but is counterproductive in light of the company's current dividend policy (also announced last year). The currently-served version of this article seems to address the dividend issue by removing all reference to it. At least they notice when they have it wrong.

Still, to suggest that ACAS' '"pop" was in effect predicted by CAPS is silly. Not long ago, ACAS was featured in a Motley Fool article titled "3 Stocks in a Tailspin". Moreover, ACAS was a four-of-five-star pick when it began falling from the $40s. As CAPS participants' own experience shows, loving ACAS can look smart or stupid depending on the price one declares one's view. Some of them don't look much smarter than the Jaded Consumer.

To the extent ACAS is attractive as an investment, it's because management has a track record of avoiding lemons and over time has produced excellent returns (15% compounded in 264 realizations since Aug. 1997) on its investments (and, depending when they bought, its shareholders). ACAS claims to be a value-oriented investment house (see Myung Yi's Special Situations Group video). I believe these are great times to make value-oriented investments and I think there are reasons to give ACAS an opportunity to perform.

Let's just not get carried away with regular quarterly dividends as a present-day reason to purchase. There may be a great trade opportunity someplace, but I can't time worth a dime. I'm in for the long haul or not at all. ACAS' opportunity to sniff out unnoticed bargains eclipses my own, and I'm happy to let ACAS create a diversified portfolio for my benefit.


Camilo said...

Latest press release says company sold for 1% less than last valuation. I'm confused.

clb said...

yes, the fool is shamefully riddled with self promotion. I picked ACAS at about $32 (thought it was on sale then, heh, see how that worked out). I have subscribed to the stock advisor though and have been quite happy with the service.

Jaded Consumer said...

Camilo: The press release contains the info in the shareholder email I described here. Essentially, the purchase was for $400m, but ACAS didn't own all that, some of it was held in funds managed by ACAS for others. ACAS' portion was $182m, which is right near last quarter's $182.6m valuation (if I recall the valuation properly; it's in the 10-Q).

CLB: I'm thinking about subscribing to a Fool info service myself. I'm ordinarily interested in Fool analysis, but the daily articles are clearly intended to fish for ad revenue rather than to enlighten the masses. The subscription material is likely worth more.