Daniel Demetri

Volt Information Services: Going Where the Panic Is

On the other hand, their receivables are less than their revenue.

Volt Information Services: Going Where the Panic Is

There’s very little in their latest Q that talks about what their receivables are. All they mention is the “Amended Securitization Program” they’ve set up with a syndicate of banks.

Basically in June 2008 these banks agreed to lend VOL money at 2.3% against receivables… up to $200mm (later reduced to $175mm in Jan 2009). The program ends in 2013 but the liquidity expires in 2010, whatever that means.

I feel like 2.3% is really cheap, so their receivables are probably decent quality. I also like that their cash balance has been growing pretty steadily while their current liabilities (and even total liabilities, for that matter) have held pretty steady.

On the other hand, the banks may be stupid, or they may have arranged for a certain _type_ of receivable (the rest being possible garbage). It’s very possible that their receivables are worth ¼ of what’s stated (after all, why hasn’t the receivables balance declined since April ’08?). Inventories for them are basically receivables that haven’t been billed yet, so conservatively they have $200mm of current assets and $100mm of other assets. Their total liabilities are ALL 100% real, and they’re $430mm. Ergo, the stock is worthless from a balance sheet perspective. And they’re losing money, so there’s no value in the income statement unless you believe they can turn the company around.

Even if they were making as much profit as they were in past few years, they’d only be worth about $16/share. So basically I see a 50% chance that they’re worthless and a 15% chance of doubling your money…. Bad investment.

Percentage of Active Fund Managers That Can Beat the Market Shrinking Rapidly

I disagree. I think it's point 2. You have to prove persistence in mutual fund returns to conclude that the Interent (especially its real-time data abilities) has rendered the market for mutual funds more efficient. I don't believe that many mutual fund investors look at much other than past returns and the Morningstar Value/Size rank.

The market for asset mangers is becoming more efficient, but the market for mutual funds is probably not.