Friday, September 30, 2011

Timing ACAS

I was looking at ACAS and hunting for relevant news that might explain the apparent panic afoot, and I noticed this:

Since ACAS was "downgraded" from "hold" to "reduce", it is (despite its recent precipitous fall) up by 46.52%. Apparently, timing ACAS isn't their specialty, either. Interestingly, the ratings folks seem to rate their own ratings, too. Let's see how that works:

It seems that the ratings specialists "upgraded" ACAS to hold, and it outperformed the index to which it was compared, the ratings specialists called that a "correct" rating. "Hold" for an index-beating return. The more recent period, the ratings specialists admit to be incorrect. Yet, the rating stands at "reduce".

If they stood by their rating, you'd expect a report that said "just you wait!" But, no. It's "incorrect" but it remains the rating :-)

I'm interested to hear anyone's take on the recent price action. Uncertainty and volatility both work against comparables pricing (thus against NAV), and doubt about the macro-economic environment weighs against performance of ACAS' broad-based portfolio (which one expects to behave as a leveraged proxy for the overall economy).

Buffett has bet long-term on the economy of the US. Is there reason to doubt ACAS can hold on for the long term?

Comments welcome.


Anonymous said...

ACAS suffers multiple headwinds: its debt load might scare some investors, its lack of a dividend keeps away a large part of its natural shareholder base, its apparent complexity and opacity (despite the quarterly schedule of investments, what do we really know about level-3 valuations?), its high leverage to the overall economy, its European exposure.

Against that, you have its actually acceptable and improving capital structure, its (I would argue) adroit management, and its deep undervaluation based on book and the company's own history.

For my money, the second set is more important; for analysts', likely working from a set of technical indicators and market-temperature templates, the first is.

I could go on and on about the unreliability of analysts, the conflicting interests, the surface analyses and plug-in-the-numbers mindlessness, the rapidly switching grades on companies in which no fundamental change has taken place, the "hold" ratings on companies with price targets (themselves absurd, giving a sheen of specificity to something largely unpredictable in the short term) 50% above current market and the "buy" ratings on companies with prices targets 10% above current, but this has all been written about more cleverly elsewhere.

Basically, if you have a neutral to slightly positive outlook on the US economy (which I do) and on ACAS' management (which I also do), ACAS appears very, very cheap.

Anonymous said...

Paulson has been selling. He filed tonight.