Thursday, August 11, 2016

Stupid cheap for a reason?

A few weeks ago analyst John Zechner selected TorStar (TS.B) $1.56 as a top pick – ”this is just a pure value pick. It’s not that he likes management or the industry. It has a market capitalization of about $120 million. There is net cash of about 60. There is an enterprise value of about $60-$70 billion. Dividend yield of 16.56%. Stupidly cheap.”

Now there are a number of annoying buzz words I flee from – and one of them is cheap – I have always lost money on “cheap” stocks.

Technically the stock has a history of long bears and short bull phases.

Fundamentally the company has three paths to follow. The controlling shareholders could take the company private, or they could sell the company or – they could press on and take the stock to penny stock status. Eventually most penny stocks get delisted – a sad end to a once great enterprise.

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