Requiem for a Turkey [Fribble] May 22, 2000

Fribble Requiem for a Turkey

By Peter Lincoln (TMF
May 22, 2000

I am one of the world's worst pack rats. I still have, among other things: the hand-carved jack staff to my maternal grandfather's boat (1920, and he had only one arm); my father's yacht club burgee (don't ask) and the original copy of his monograph on tuberculosis (he was a pioneer); some of my kid's first teeth (inflation hedge); a new wood-and-brass level, in box, owned by my paternal grandfather (circa 1900 -- that puppy is worth something); a picture of an old flame (nobody's perfect); and the AK-47 cartridge I carried in Southeast Asia with my name scratched on the projectile (every little bit helps). Got the picture? Great!

In the investing realm, my favorite piece of rat junk is a somewhat dodgie and tattered certificate for a now-defunct Texas banking combine called M-Corp. I bought these shares in the middle of the S&L crisis on the theory that there ought to be some real value out there in all that financial wreckage. The certificate itself represents a whole litany of investment screwups and "don'ts," all rolled into one.

How did I muff this one? The idea itself was actually a pretty good one. But, buying junk is as much of an art form as anything else. Financials count even more. I saw 50% of a conservative book, a growing asset base coming in (I thought) dirt-cheap courtesy of the FDIC and FSLIC, acquisitions that looked good on paper and, for a while, the share price blossomed.

But, the earnings weren't there. Management's public comments were rather wishy-washy. Cash flow? I thought they were awash in the stuff. Besides that, they had a credit card operation that everybody said was a pearl.

Then the price appreciation faltered and the asset sales began. "This doesn't fit our business plan." "We think the money would be better employed in (whatever)." "This is simply a strategic realignment." Analysts, for the most part, were backing management. Whenever a company buys or sells an asset, you had better go beyond management comments and analyst opinions.

Finally, even the crown jewels were being sold off and it dawned on me for the first time that this just might have been a bad idea. Time to sell? Yes. But, let's wait for it to bounce back up a bit first. Ever heard the term "dead cat bounce?" I checked into this. They don't. The price went down even more. Well, it's too late to sell now, so let's just see what happens. Most of the money is gone anyway. It's almost never too late to sell. There were more mistakes, but I'm too embarrassed to mention them all.

I will say this: That worthless certificate is worth a lot to me. I keep it in plain sight as I work. Fortunately, one learns and grows a bit with these things. And time gives a better perspective.