Tom Shohfi - Seeking Alpha 'Tom Shohfi' Tag RSS Syndication from SeekingAlpha.com SeekingAlpha.com http://seekingalpha.com/author/tom-shohfi NYSSA Event: A New Twist on FCF Focused Valuation http://seekingalpha.com/article/159410-nyssa-event-a-new-twist-on-fcf-focused-valuation?source=feed 159410 Last week, I attended an event hosted by the New York Society of Security Analysts in midtown Manhattan. The evening centered on George C. Christy and his book Free Cash Flow: Seeing Through the Accounting Fog Machine to Find Great Stocks. Mr. Christy has over thirty years of professional financial experience including time at GE Capital.
Mr. Christy began by stating the well known belief that most of the “accounting fog” in modern financial statements comes from accrual accounting. He referenced Georgia Tech accounting professor Charles Mulford’s book Creative Cash Flow Reporting for further demonstration (note that Mulford also endorsed Christy’s book, so there’s a bit of cross-promotional bias there). Public companies are managed for earnings per share rather than cash generated for shareholders. While these are solid points, he made a very bold claim by stating that “only 10-20% of CEOs can define free cash flow.” Considering that 39% of S&P 500 CEOs have MBAs (and, according to Spencer Stuart, 22% of the S&P 500 CEOs have MBAs from Harvard), that claim may be a bit exaggerated unless introductory accounting and finance classes are not taught anywhere else but Cambridge. It was much easier to believe his statement that, without the help of their auditors, “before (Sarbanes-Oxley), many small microcap companies could not generate a cash flow statement.” Much earlier in his career, Mr. Christy worked at a microcap investor relations firm and has particular expertise on that subject.
My main takeaway from the evening is the emphasis on free cash flow deployment and its ability to add to (or subtract from) shareholder value. “Companies will be able to differentiate themselves through efficient use of capital,” Mr. Christy noted. This is accomplished by using capital either for acquisitions, dividends, as well as debt and share repurchases.
Mr. Christy’s approach is novel and quite elegant, but, like all valuation methodologies, is not without criticism. Most notably is the use of current stock price as a starting point rather than a pure bottom up approach of determining equity value such as a discounted cash flow model. Plain use of dividend yield, which one of the attendees brought up in the Q&A session, is also dependent on taxation policies, payout ratio and shareholder preference for dividends. For example, if an investor buys a company for a great management team who makes excellent use of capital, retentions or buybacks are preferred. Though this is easily solved with a dividend reinvestment plan (DRIP), the argument makes adding the dividend yield here redundant and overestimates expected return. Finally, there was very little specific mention of how to estimate value added due to acquisitions. This, however, can be a highly strategic and qualitative subject that is difficult to quantify even for the most sophisticated industry analysts.
Disclosure: The author does not have positions in any of the mentioned securities at the time of this writing.

The author attended the NYSSA Free Cash Flow conference courtesy of Seeking Alpha. All Seeking Alpha authors are eligible to attend upcoming conferences for free.

]]> Thu, 27 Aug 2009 14:34:36 -0400 Tom Shohfi Tom Shohfi submits:
Last week, I attended an event hosted by the New York Society of Security Analysts in midtown Manhattan. The evening centered on George C. Christy and his book Free Cash Flow: Seeing Through the Accounting Fog Machine to Find Great Stocks. Mr. Christy has over thirty years of professional financial experience including time at GE Capital.
Mr. Christy began by stating the well known belief that most of the “accounting fog” in modern financial statements comes from accrual accounting. He referenced Georgia Tech accounting professor Charles Mulford’s book Creative Cash Flow Reporting for further demonstration (note that Mulford also endorsed Christy’s book, so there’s a bit of cross-promotional bias there). Public companies are managed for earnings per share rather than cash generated for shareholders. While these are solid points, he made a very bold claim by stating that “only 10-20% of CEOs can define free cash flow.” Considering that 39% of S&P 500 CEOs have MBAs (and, according to Spencer Stuart, 22% of the S&P 500 CEOs have MBAs from Harvard), that claim may be a bit exaggerated unless introductory accounting and finance classes are not taught anywhere else but Cambridge. It was much easier to believe his statement that, without the help of their auditors, “before (Sarbanes-Oxley), many small microcap companies could not generate a cash flow statement.” Much earlier in his career, Mr. Christy worked at a microcap investor relations firm and has particular expertise on that subject.
My main takeaway from the evening is the emphasis on free cash flow deployment and its ability to add to (or subtract from) shareholder value. “Companies will be able to differentiate themselves through efficient use of capital,” Mr. Christy noted. This is accomplished by using capital either for acquisitions, dividends, as well as debt and share repurchases.
Mr. Christy’s approach is novel and quite elegant, but, like all valuation methodologies, is not without criticism. Most notably is the use of current stock price as a starting point rather than a pure bottom up approach of determining equity value such as a discounted cash flow model. Plain use of dividend yield, which one of the attendees brought up in the Q&A session, is also dependent on taxation policies, payout ratio and shareholder preference for dividends. For example, if an investor buys a company for a great management team who makes excellent use of capital, retentions or buybacks are preferred. Though this is easily solved with a dividend reinvestment plan (DRIP), the argument makes adding the dividend yield here redundant and overestimates expected return. Finally, there was very little specific mention of how to estimate value added due to acquisitions. This, however, can be a highly strategic and qualitative subject that is difficult to quantify even for the most sophisticated industry analysts.
Disclosure: The author does not have positions in any of the mentioned securities at the time of this writing.

The author attended the NYSSA Free Cash Flow conference courtesy of Seeking Alpha. All Seeking Alpha authors are eligible to attend upcoming conferences for free.


Complete Story »]]> Tom Shohfi Beware the Equity Crater http://seekingalpha.com/article/156835-beware-the-equity-crater?source=feed 156835 In a class early last academic year, I drew a quick diagram for students to summarize valuation between the balance sheet and income/cash flow statements: simply three blocks making up a horizontal bar. The first block was net tangible equity, the second was intangibles that added value to the company and the third represented the future cash flows that the company was likely to produce according to reasonably constructed financial models.

As we move from the left to the right, things change. Net tangible book equity is on the balance sheet right now and can, assuming financial statements are represented fairly, be valued rather easily. Intangibles are more difficult to measure as some, such as goodwill, are effectively worthless while others are intertwined with future cash flows and can not be liquidated easily. Certainty increases moving from right to left and upside for investors changes in the opposite direction. Future negative cash flows would eat away at tangible assets (cash hemorrhaging or "right folding" effect) and would therefore easily explain why many unprofitable public companies are priced at discounts to tangible equity.

]]> Tue, 18 Aug 2009 13:25:38 -0400 Tom Shohfi Tom Shohfi submits:

In a class early last academic year, I drew a quick diagram for students to summarize valuation between the balance sheet and income/cash flow statements: simply three blocks making up a horizontal bar. The first block was net tangible equity, the second was intangibles that added value to the company and the third represented the future cash flows that the company was likely to produce according to reasonably constructed financial models.

As we move from the left to the right, things change. Net tangible book equity is on the balance sheet right now and can, assuming financial statements are represented fairly, be valued rather easily. Intangibles are more difficult to measure as some, such as goodwill, are effectively worthless while others are intertwined with future cash flows and can not be liquidated easily. Certainty increases moving from right to left and upside for investors changes in the opposite direction. Future negative cash flows would eat away at tangible assets (cash hemorrhaging or "right folding" effect) and would therefore easily explain why many unprofitable public companies are priced at discounts to tangible equity.


Complete Story »]]> BA DIA IWM SPY Tom Shohfi 10 Small Cap Stocks with Double-Digit Free-Cash-Flow Yields http://seekingalpha.com/article/145898-10-small-cap-stocks-with-double-digit-free-cash-flow-yields?source=feed 145898 Free cash flow (FCF) yield can is an often overlooked financial metric in equity valuation. The cash generated from operations after capital expenditures is what effectively belongs to shareholders in the form of dividends or retained earnings. That’s why many fundamental value analysts use FCF yield as an important gauge of the ongoing financial health of a company. If cash is king, then free cash flow is the path to royalty.

Here are ten stocks with high double digit last twelve months free cash flow yields (actually greater than 12.5% FCF yield when considering an anticipated drop of no less than 20% during a weaker 2009) with price to tangible book values and trailing P/E ratios less than or equal to the average values of the Russell 2000 small cap index.

]]> Mon, 29 Jun 2009 04:17:05 -0400 Tom Shohfi Tom Shohfi submits:

Free cash flow (FCF) yield can is an often overlooked financial metric in equity valuation. The cash generated from operations after capital expenditures is what effectively belongs to shareholders in the form of dividends or retained earnings. That’s why many fundamental value analysts use FCF yield as an important gauge of the ongoing financial health of a company. If cash is king, then free cash flow is the path to royalty.

Here are ten stocks with high double digit last twelve months free cash flow yields (actually greater than 12.5% FCF yield when considering an anticipated drop of no less than 20% during a weaker 2009) with price to tangible book values and trailing P/E ratios less than or equal to the average values of the Russell 2000 small cap index.


Complete Story »]]> AMPH AWI FRD HAYN MALL MGIC MTX NSIT PCCC SYNL TGA UFPT WPCS Tom Shohfi 5 (More) Profitable Smallcaps Trading at a Fraction of Tangible Book Value http://seekingalpha.com/article/130643-5-more-profitable-smallcaps-trading-at-a-fraction-of-tangible-book-value?source=feed 130643 Last November, my first Seeking Alpha contribution featured five profitable small capitalization stocks priced at significant discounts to tangible book value. Since that time, the Russell 2000 (^RUT) has fallen about 13%. However, all five of those stocks have outperformed the index and two, Chinese dietary supplement manufacturer Tiens Biotech Group (TBV) and zinc producer Horsehead Holdings (ZINC), have seen very high returns over the past five months. I once heard a director of equity research at a large buy side firm say that an analyst doesn’t necessarily have to be right on stock calls more than 50% of the time, but when he/she makes a right call, it better be very right. TBV no longer fits the criteria of trading at a fraction of tangible book value. However, since ZINC is still trading at a slight discount and is a reasonably good dollar weakness play, I’m still holding on to it for now but am examining other opportunities that may represent better present values.

]]> Mon, 13 Apr 2009 05:45:30 -0400 Tom Shohfi Tom Shohfi submits:

Last November, my first Seeking Alpha contribution featured five profitable small capitalization stocks priced at significant discounts to tangible book value. Since that time, the Russell 2000 (^RUT) has fallen about 13%. However, all five of those stocks have outperformed the index and two, Chinese dietary supplement manufacturer Tiens Biotech Group (TBV) and zinc producer Horsehead Holdings (ZINC), have seen very high returns over the past five months. I once heard a director of equity research at a large buy side firm say that an analyst doesn’t necessarily have to be right on stock calls more than 50% of the time, but when he/she makes a right call, it better be very right. TBV no longer fits the criteria of trading at a fraction of tangible book value. However, since ZINC is still trading at a slight discount and is a reasonably good dollar weakness play, I’m still holding on to it for now but am examining other opportunities that may represent better present values.


Complete Story »]]> AWX BNHNA GSIG SORL TIII Tom Shohfi How Do the Ratings Agencies Compare? http://seekingalpha.com/article/127316-how-do-the-ratings-agencies-compare?source=feed 127316 The ratings agencies have taken their fair share of abuse from Congress, media outlets as well as SeekingAlpha’s contributors. Todd Sullivan, Money Morning, Tom Brown are just a few of the contributors who have taken their shots against the controversial trio of Standard & Poor’s (MHP), Moody’s (MCO) and Fitch Ratings. Add another one to that list. These companies have destroyed the meaning of their very own ratings. They have played a crucial role in redefining how investors view the risk of assets. MHP and MCO shares, however, have held up reasonably well to the financial sector (XLF).

]]> Mon, 23 Mar 2009 06:01:00 -0400 Tom Shohfi Tom Shohfi submits:

The ratings agencies have taken their fair share of abuse from Congress, media outlets as well as SeekingAlpha’s contributors. Todd Sullivan, Money Morning, Tom Brown are just a few of the contributors who have taken their shots against the controversial trio of Standard & Poor’s (MHP), Moody’s (MCO) and Fitch Ratings. Add another one to that list. These companies have destroyed the meaning of their very own ratings. They have played a crucial role in redefining how investors view the risk of assets. MHP and MCO shares, however, have held up reasonably well to the financial sector (XLF).


Complete Story »]]> MCO MHP SCHL WPO XLF Tom Shohfi Rambus's Litigation-Based Business Can't Last http://seekingalpha.com/article/124294-rambus-s-litigation-based-business-can-t-last?source=feed 124294 When it comes to Rambus (RMBS), a lawyer might be better qualified than a financial analyst to determine the direction of its shares. Wednesday was another fine example of this stock’s volatile responsiveness to legal and regulatory developments. Rambus shares rose 8.8% after a US District court in San Francisco ruled in their favor on Tuesday afternoon. RMBS is, after all, a high beta (~2.2) stock and large moves are to be expected. The stock has posted double digit percentage gains on 123 trading days since its IPO on May 14th, 1997. However, even when including the years before the tech bubble burst, most of these big moves have come from legal, not product or real earnings related developments.

click to enlarge

]]> Thu, 05 Mar 2009 07:24:08 -0500 Tom Shohfi Tom Shohfi submits:

When it comes to Rambus (RMBS), a lawyer might be better qualified than a financial analyst to determine the direction of its shares. Wednesday was another fine example of this stock’s volatile responsiveness to legal and regulatory developments. Rambus shares rose 8.8% after a US District court in San Francisco ruled in their favor on Tuesday afternoon. RMBS is, after all, a high beta (~2.2) stock and large moves are to be expected. The stock has posted double digit percentage gains on 123 trading days since its IPO on May 14th, 1997. However, even when including the years before the tech bubble burst, most of these big moves have come from legal, not product or real earnings related developments.

click to enlarge


Complete Story »]]> ACTS MU NVDA RMBS SIGM SNDK Tom Shohfi 5 Great High Yielding Small Cap Opportunities http://seekingalpha.com/article/123795-5-great-high-yielding-small-cap-opportunities?source=feed 123795

Following my colleague John Femino’s recent article, I wanted to add my own contribution on some great high yielding equity opportunities in the lower end of the market capitalization spectrum. Long term investors can use a high, consistent dividend yield combined with a DRIP (Dividend Reinvestment Plan) to boost returns over time or provide a steady income stream. Plus, it's a widely held belief that small and micro capitalization value stocks are leading performers during market recoveries. Don’t just take my word, take Fidelity’s (though the analysis is via John Prestbo from MarketWatch).

]]> Tue, 03 Mar 2009 06:32:17 -0500 Tom Shohfi Tom Shohfi submits:

Following my colleague John Femino’s recent article, I wanted to add my own contribution on some great high yielding equity opportunities in the lower end of the market capitalization spectrum. Long term investors can use a high, consistent dividend yield combined with a DRIP (Dividend Reinvestment Plan) to boost returns over time or provide a steady income stream. Plus, it's a widely held belief that small and micro capitalization value stocks are leading performers during market recoveries. Don’t just take my word, take Fidelity’s (though the analysis is via John Prestbo from MarketWatch).


Complete Story »]]> ALOT CAW ELSE MOCO WSTG Tom Shohfi Interview with Tobin Smith on Green Investing http://seekingalpha.com/article/120208-interview-with-tobin-smith-on-green-investing?source=feed 120208 (One of the event organizers at the World Money Show arranged an interview with Tobin Smith. Tobin is known for his regular appearances on Fox New Channel's program Bulls & Bears on Saturdays at 10:00 AM EST. He's also a contributor on the relatively new Fox Business Channel. Before last week, I only knew him as another talking head on an investing-news-entertainment television program, but I was truly impressed with his knowledge of the markets and analytical ability. Tobin's day job is as the founder and chairman at ChangeWave Research, part of InvestorPlace Media, but he's also written a new book called Billion Dollar Green: Profit from the Eco Revolution. We spoke briefly about a couple of trends that he sees and discusses in his book, as well as individual companies that will be significantly impacted.)

Mandates Drive Behavior

Toby emphasized the role of government mandates in dictating how green technologies will be adopted. One of these mandates is a ban of the traditional incandescent light bulbs that so many of us have used all our lives. It is widely known that incandescent bulbs produce a lot of heat and don't last particularly long. Many countries currently have restrictions in place and bans in Europe will begin in 2012. The United States is expected to follow in 2014. This has led to increased sales of the coiled CFL (compact fluorescent light) bulbs, particularly at leaders like Wal-Mart (WMT). According to Mr. Smith, CFL (~75% light efficient) is the first step and LED (light-emitting diode) technology (~95% efficient), despite its present cost, is next. To capitalize on this trend, one of the ideas that Toby likes (and owns a small position in), is Durham, North Carolina-based CREE (CREE). He is "thoroughly amazed that Philips hasn't bought them yet." Philips did decide to buy Color Kinetics in the summer of 2007, so perhaps the company feels that its LED portfolio is complete. Adding to his thesis is the feeling that Cree's LED intellectual property is deep and offers a lucrative license revenue stream. If the company stays independent, its China-based manufacturing capabilities acquired from Cotco should help it compete in production with larger LED rivals Philips (PHG) and General Electric (GE).

]]> Thu, 12 Feb 2009 10:00:30 -0500 Tom Shohfi Tom Shohfi submits:

(One of the event organizers at the World Money Show arranged an interview with Tobin Smith. Tobin is known for his regular appearances on Fox New Channel's program Bulls & Bears on Saturdays at 10:00 AM EST. He's also a contributor on the relatively new Fox Business Channel. Before last week, I only knew him as another talking head on an investing-news-entertainment television program, but I was truly impressed with his knowledge of the markets and analytical ability. Tobin's day job is as the founder and chairman at ChangeWave Research, part of InvestorPlace Media, but he's also written a new book called Billion Dollar Green: Profit from the Eco Revolution. We spoke briefly about a couple of trends that he sees and discusses in his book, as well as individual companies that will be significantly impacted.)

Mandates Drive Behavior

Toby emphasized the role of government mandates in dictating how green technologies will be adopted. One of these mandates is a ban of the traditional incandescent light bulbs that so many of us have used all our lives. It is widely known that incandescent bulbs produce a lot of heat and don't last particularly long. Many countries currently have restrictions in place and bans in Europe will begin in 2012. The United States is expected to follow in 2014. This has led to increased sales of the coiled CFL (compact fluorescent light) bulbs, particularly at leaders like Wal-Mart (WMT). According to Mr. Smith, CFL (~75% light efficient) is the first step and LED (light-emitting diode) technology (~95% efficient), despite its present cost, is next. To capitalize on this trend, one of the ideas that Toby likes (and owns a small position in), is Durham, North Carolina-based CREE (CREE). He is "thoroughly amazed that Philips hasn't bought them yet." Philips did decide to buy Color Kinetics in the summer of 2007, so perhaps the company feels that its LED portfolio is complete. Adding to his thesis is the feeling that Cree's LED intellectual property is deep and offers a lucrative license revenue stream. If the company stays independent, its China-based manufacturing capabilities acquired from Cotco should help it compete in production with larger LED rivals Philips (PHG) and General Electric (GE).


Complete Story »]]> CREE ELON ENER FPL GE HOKU ITRI LDK PHG PWR Tom Shohfi How to Invest in Six Demographic Trends http://seekingalpha.com/article/119193-how-to-invest-in-six-demographic-trends?source=feed 119193 Having been so intrigued by James Altucher's pick Cynosure (CYNO), I decided to listen to his longer individual presentation on the demographic investing opportunities explored in his new book. Altucher is a manager of a fund of hedge funds called Formula Capital and, like myself, has a background in computer science. One of the organizers of the World Money Show said that Altucher would be willing to be interviewed, but since my e-mails went unresponded, apparently, not interviewed by someone writing for SeekingAlpha. Oh well, I suppose RealMoney and TheStreet.com are fighting hard for web traffic these days. Regardless, I find Altucher's ideas interesting and thought it would be worthwhile to examine some of the themes that he sees driving profits and high equity returns through the next few years (aside from tattoo removal).

Obesity

It's pretty clear that obesity is an enormous problem in the U.S., but apparently the old favorites NutriSystem (NTSI) and Weight Watchers (WTW) may not be the best way to play this unfortunate trend. While drug makers search for new obesity treatments to find a quicker fix, Altucher found an interesting corollary play related to sleep apnea in the form of ResMed (RMD). According to SleepEducation.com, there is a strong relationship between weight and obstructive sleep apnea (OSA), with OSA being most common in obese, middle-aged men. ResMed makes diagnostic and treatment equipment for sleep-disordered breathing. At 27x trailing/16x forward EPS, there is a lot of growth priced in to RMD shares. His other obesity related idea is small cap Synovis Life Technologies (SYNO) which makes biomaterial surgical staples and related products that are used in, among other procedures, gastric bypass surgery. I wonder how New York Governor Patterson's proposed soda tax fits into this thesis!

]]> Sun, 08 Feb 2009 08:05:46 -0500 Tom Shohfi Tom Shohfi submits:

Having been so intrigued by James Altucher's pick Cynosure (CYNO), I decided to listen to his longer individual presentation on the demographic investing opportunities explored in his new book. Altucher is a manager of a fund of hedge funds called Formula Capital and, like myself, has a background in computer science. One of the organizers of the World Money Show said that Altucher would be willing to be interviewed, but since my e-mails went unresponded, apparently, not interviewed by someone writing for SeekingAlpha. Oh well, I suppose RealMoney and TheStreet.com are fighting hard for web traffic these days. Regardless, I find Altucher's ideas interesting and thought it would be worthwhile to examine some of the themes that he sees driving profits and high equity returns through the next few years (aside from tattoo removal).

Obesity

It's pretty clear that obesity is an enormous problem in the U.S., but apparently the old favorites NutriSystem (NTSI) and Weight Watchers (WTW) may not be the best way to play this unfortunate trend. While drug makers search for new obesity treatments to find a quicker fix, Altucher found an interesting corollary play related to sleep apnea in the form of ResMed (RMD). According to SleepEducation.com, there is a strong relationship between weight and obstructive sleep apnea (OSA), with OSA being most common in obese, middle-aged men. ResMed makes diagnostic and treatment equipment for sleep-disordered breathing. At 27x trailing/16x forward EPS, there is a lot of growth priced in to RMD shares. His other obesity related idea is small cap Synovis Life Technologies (SYNO) which makes biomaterial surgical staples and related products that are used in, among other procedures, gastric bypass surgery. I wonder how New York Governor Patterson's proposed soda tax fits into this thesis!


Complete Story »]]> ALV BWA CHS EZPW FCFS IDXX INTX MON RMD SYNO ZMH Tom Shohfi The World Money Show: Five High Yielding Energy Trusts http://seekingalpha.com/article/118720-the-world-money-show-five-high-yielding-energy-trusts?source=feed 118720 This is my first trip to InterShow’s the World Money Show in Orlando, Florida. After speaking to a few frequenters of the event, the list of speakers is completely different this year. Last year’s group apparently lost a lot of credibility after the market plunge of 2008. While the attendees at the event are almost entirely retail investors and the majority have AARP cards, the morning’s economic speaker Ron Muhlenkamp, summed it up well for the younger ones among the crowd. He said, “everyone’s first recession as an adult is traumatic.” It takes living through four or five to truly have perspective during troubled times.

That’s why most of the attendees are looking for ideas for putting money to work. There are some great panels, lecture topics and individual speakers, but the two most prominent topics are energy investing and technical analysis. Now, having received my financial education from a distinguished professor who is a product of the University of Chicago’s efficient market school of thought, I simply can’t buy into any of the schools of technical analysis or high frequency trading philosophies. Volatility and market distortions can destroy any methodology, but when fundamentals are not working, market technicians seem to have more pull than ever.

]]> Thu, 05 Feb 2009 08:11:50 -0500 Tom Shohfi Tom Shohfi submits:

This is my first trip to InterShow’s the World Money Show in Orlando, Florida. After speaking to a few frequenters of the event, the list of speakers is completely different this year. Last year’s group apparently lost a lot of credibility after the market plunge of 2008. While the attendees at the event are almost entirely retail investors and the majority have AARP cards, the morning’s economic speaker Ron Muhlenkamp, summed it up well for the younger ones among the crowd. He said, “everyone’s first recession as an adult is traumatic.” It takes living through four or five to truly have perspective during troubled times.

That’s why most of the attendees are looking for ideas for putting money to work. There are some great panels, lecture topics and individual speakers, but the two most prominent topics are energy investing and technical analysis. Now, having received my financial education from a distinguished professor who is a product of the University of Chicago’s efficient market school of thought, I simply can’t buy into any of the schools of technical analysis or high frequency trading philosophies. Volatility and market distortions can destroy any methodology, but when fundamentals are not working, market technicians seem to have more pull than ever.


Complete Story »]]> BTE CYNO ERF LINE PGH PWE Tom Shohfi Bank of America Has a Culture Crisis http://seekingalpha.com/article/115893-bank-of-america-has-a-culture-crisis?source=feed 115893 Like its fellow universal bank Citigroup (C), Bank of America (BAC) has tapped the government for as much capital as it can and has helped rock financial stocks once again. First and foremost, in the interest of fair disclosure, I worked in Banc of America's capital markets division for a summer and know many people who have been through the organization and are still employed there. Even in my brief time there, I could definitely sense an inferiority complex about not being "bulge bracket" like the pure play investment banks or even the universal banks with deeper ties to Wall Street history (JP Morgan, Salomon Brothers). Among other things, buying Merrill Lynch was the way to end all discussion about being bulge bracket. The irony is that Wall Street, in its transformation, ignored a potential problem that has plagued M&A deals across many industries: culture conflict.

In July of 2007, I had a brief e-mail exchange with Matt Asay, an executive at open source software company Alfresco and writer of the Open Road, a well known blog on everything that is open source. At the time, Oracle (ORCL) had been on a buying spree and M&A deal talk speculation was everywhere and he had written a bit about some potential culture pitfalls. Here's an unedited excerpt that I wrote to Mr. Asay:

]]> Thu, 22 Jan 2009 06:16:53 -0500 Tom Shohfi Tom Shohfi submits:

Like its fellow universal bank Citigroup (C), Bank of America (BAC) has tapped the government for as much capital as it can and has helped rock financial stocks once again. First and foremost, in the interest of fair disclosure, I worked in Banc of America's capital markets division for a summer and know many people who have been through the organization and are still employed there. Even in my brief time there, I could definitely sense an inferiority complex about not being "bulge bracket" like the pure play investment banks or even the universal banks with deeper ties to Wall Street history (JP Morgan, Salomon Brothers). Among other things, buying Merrill Lynch was the way to end all discussion about being bulge bracket. The irony is that Wall Street, in its transformation, ignored a potential problem that has plagued M&A deals across many industries: culture conflict.

In July of 2007, I had a brief e-mail exchange with Matt Asay, an executive at open source software company Alfresco and writer of the Open Road, a well known blog on everything that is open source. At the time, Oracle (ORCL) had been on a buying spree and M&A deal talk speculation was everywhere and he had written a bit about some potential culture pitfalls. Here's an unedited excerpt that I wrote to Mr. Asay:


Complete Story »]]> BAC Tom Shohfi 5 Profitable Small Caps Priced at Significant Discounts to Tangible Book Value http://seekingalpha.com/article/103811-5-profitable-small-caps-priced-at-significant-discounts-to-tangible-book-value?source=feed 103811 In this kind of bear market, the phrase “throwing the baby out with the bath water” gets used quite frequently. However, there are some stocks that are truly worthy of this claim. Small caps in particular present some intriguing values with shares of profitable companies trading at a discount to tangible book value. Why consider buying opaque financial assets at pennies on the dollar when there are real companies, with little to no debt, that can be purchased at similar markdowns?

Our screens found five companies, in different industries, that are currently priced at significant discounts to tangible book:

]]> Tue, 04 Nov 2008 03:33:33 -0500 Tom Shohfi Tom Shohfi submits:

In this kind of bear market, the phrase “throwing the baby out with the bath water” gets used quite frequently. However, there are some stocks that are truly worthy of this claim. Small caps in particular present some intriguing values with shares of profitable companies trading at a discount to tangible book value. Why consider buying opaque financial assets at pennies on the dollar when there are real companies, with little to no debt, that can be purchased at similar markdowns?

Our screens found five companies, in different industries, that are currently priced at significant discounts to tangible book:


Complete Story »]]> ACTS QXM SFN XING ZINC Tom Shohfi