Dominion Homes (DHOM) is a small company that makes homes around central Ohio as well as parts of Kentucky. During the housing boom of the 1990s, Dominion aggressively purchased as much land as they could upfront with debt to take advantage of what they foolishly believed would be an everlasting housing boom.
Now I will admit personally that I don’t know everything there is to know about the housing industry, but I do know that it is a cyclical industry. Therefor,e I would say, using that logic, it is extremely foolish to have a balance sheet with hardly any cash, but with tons of land, and a lot of debt. It seems to me that they were asking for bankruptcy many years ago.
Now that I have bashed this company as much as I can, I do believe it can be saved from declaring bankruptcy. If a large investor decided to give the company liquidity, the company could use that cash to pay down its debtm and therefore not be forced to liquidate its land inventory for pennies on the dollar. The company then would be able to weather out the housing bust. The large investor would also make a lot of money, too.
Disclosure: At the time of this post, I do not own any shares of Dominion Homes.