Avoid These Cash Machines

I love nothing better than finding a company that pours buckets of cash into my portfolio. Private-equity funds do, too, but often the cash they're angling for is yours. They love to make public companies into their own ATMs through a shrewd device that you should beware, and their plundering of companies offers a key lesson for investors like us.

Like an ATM, but better
One legendary private equity shop, Kohlberg Kravis Roberts (KKR), has perfected the ability to extract exorbitant sums of cash from companies in a perfectly legal way. Take a look at the recent stunt it pulled on Dollar General.

KKR and fellow investors Citigroup (NYSE: C  ) and Goldman Sachs (NYSE: GS  ) took Dollar General private in July 2007 at a cost of $7.3 billion. They released the company back to the public markets this past November, offering about 10% of the shares in an IPO and retaining the rest. Following its launch, the company was valued at $7.2 billion.

Now, it looks like Dollar General's investors lost $100 million on the deal, so where's all this profit I'm talking about?

For that, you have to examine how Dollar General was used while it was private. When KKR bought Dollar General in 2007, it and fellow investors put up just $2.8 billion and borrowed the remaining $4.5 billion. At that time, Dollar General had just $260 million in debt, the interest on which it could easily cover with its earnings.

Fast-forward to November 2009 and the IPO. Dollar General suddenly had about $4.2 billion in debt, and its ability to support its own debt is severely crimped. In fact, the business has to pay about 39% of its operating income just in interest. Ouch!

That sudden debt spike shows that KKR and its co-investors simply transferred their borrowings of $4.5 billion onto Dollar General's balance sheet. For their efforts, they took home a 150% paper profit (based on the IPO price), excluding fees and the costs of some rather minimal work they performed in reorganizing Dollar General -- much of which was charged to Dollar General.

As a final kick to the curb, just before making it a public company, the private-equity giant paid itself and other investors a fat dividend, to the tune of $239 million -- more than double what Dollar General earned in that quarter. As a public company, Dollar General doesn't even pay a dividend. And that's not the amazing part.

The amazing part
Of the IPO, Bloomberg quoted one analyst as saying, "It's a good price for investors." If by investors, he means KKR and its cronies, then this analyst is spot-on. But for individual investors like you and me, the deal is an awful mess.

What is utterly astounding, mystifying, and discombobulating about this whole process is that investors buy what KKR is selling. After all, no one's under duress to buy a second-tier retailer, and you could even more easily pick up shares in a slow-growing cash cow such as Verizon (NYSE: VZ  ) or Procter & Gamble (NYSE: PG  ) and be none the worse off.

But, again, why buy Dollar General? If you must have a retailer, there are quite a few financially sound organizations with good competitive advantages available at cheaper prices. Certainly, that's one reason superinvestor Warren Buffett bought shares of Wal-Mart (NYSE: WMT  ) instead of the latest IPO peddled by private-equity firms.

The key lesson: Beware not only what you buy, but from whom you buy.

When Dollar General hit the markets again, it sported a 26.9 P/E ratio -- a stunning 77% higher than that of Wal-Mart, the world's biggest retailer. Even after it reported substantially increased quarterly income, Dollar General still trades at more than 22 times earnings, still higher than the well-heeled and more secure Target (NYSE: TGT  ) . That's expensive for such a leveraged deep discounter, especially one poised to lose its attractiveness as we pull out of our economic slump and customers return to full-price and "plain ol' discount" retail.

It's little surprise that KKR waited until November 2009 to unleash Dollar General. After all, private equity sells when it estimates the market is highest, and KKR is a private-equity leader for just that very reason. And the unattractive position of Dollar General likely explains why KKR did not spin out the entire company: Investors simply wouldn't stomach this stinky investment in one gulp. But there are still plenty of cheap, undiscovered companies.

Whither my investment dollars?
Rather than invest in discounters teetering on the brink, stick to cash-rich companies that are well-positioned to ride global growth. Motley Fool Hidden Gems has recommended several virtually debt-free small-cap retailers that have room to expand around the world, yet none of the financial drawbacks of the latest private-equity deal.

Hidden Gems co-advisor Seth Jayson selected Guess? (NYSE: GES  ) as a candidate for Hidden Gems' real-money portfolio. In his analysis, Seth noted the company's ability to generate free cash flow at a prodigious rate. In fact, Guess? had tripled free cash flow in the five years ending in April 2009. At that time, it was trading at a reasonable valuation, and despite a near-double since then, the stock still trades at 18 times earnings.

If you'd like Hidden Gems co-advisors Seth Jayson and Andy Cross to help you find superior small-cap ideas and avoid the curse of buying someone else's ATM, you can check out all of our Hidden Gems stock research, as well as our eight "Buy First" small caps for new money now, free for the next 30 days.

Click here for more information.

Already a Hidden Gems member? Log in here.

Fool contributor Jim Royal, Ph.D. doesn't own shares of any company mentioned. Wal-Mart is an Inside Value recommendation. Procter & Gamble is an Income Investor recommendation. The Fool owns shares of Procter & Gamble. The Fool has a disclosure policy.


Read/Post Comments (38) | Recommend This Article (116)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 29, 2010, at 5:14 PM, ecloud wrote:

    So how about an option play to profit from the downside then?

  • Report this Comment On January 29, 2010, at 8:03 PM, NFender wrote:

    I agree the KKR approach is shady, but since KKR still owns 90% of the company don;t they also "own" 90% of the debt, at least until they can sell more shares?

  • Report this Comment On January 29, 2010, at 10:59 PM, FoolIggy wrote:

    Why doesn't the SEC step in and STOP this kind of CHICANERY???

    In the old days' you could tar and feather the 'snake oil salesman' when he fleeced the town, but of course, that was before there were lots of lawyers!

    This is wrong on so many fronts that at some point, it will bring down WALL STRETT, again, if it is allowed to go unchecked!!!!

    Good businesses, good jobs, and people's lives are ruined by this kind of action, created in a system by lawyers, for lawyers, interpreted by lawyers!

  • Report this Comment On January 29, 2010, at 11:01 PM, Vas64 wrote:

    It is very annoying to get these snippets that try to bate and switch you into buying a membership, particularly since I am already a member. Why don't they just email you an article? The problem is that there is not much to email, it is mostly sizzle and no steak, I guess.

  • Report this Comment On January 29, 2010, at 11:46 PM, jomueller1 wrote:

    What companies like KKR do is legalised street robbery. Some countriesd tried to reign into this vulture business but the lobby of private equity is to rich.

    As in the US everything goes that "makes" money I do not see any oversight coming. That's why I am grateful that the "fools" uncover this monkey business and help you stay away from those scams.

  • Report this Comment On January 30, 2010, at 2:04 AM, gusher1 wrote:

    The worst part about all this is the tax code encourages this kind of financial engineering. By assuming all that debt, Dollar General pays hundreds of millions less in taxes than they otherwise would. Each of our children assumes a bigger national debt so that Henry Kravis can line his pocket with a few more millions.

  • Report this Comment On January 30, 2010, at 2:26 AM, jomueller1 wrote:

    Thanks, gusher1.

    I missed to think of the way the tax payer is cheated. It is incomprehensible to me why people like Kravis want more and more money. Sadly enough, I believe he and people like him just play Monopoly and do not care what the dirty side effects are.

    The morals of the US should not pay as much attention to nudity but should come down on those sociopaths. But then again, "making money" is the big goal in this country.

  • Report this Comment On January 30, 2010, at 2:50 AM, PoundMutt wrote:

    The more I read of "Investors" like KKR and corporations paying obscenely large bonuses to management the more I think the stock market is just one huge Ponzi scheme!

  • Report this Comment On January 30, 2010, at 2:04 PM, bear1010 wrote:

    Add Goldman Sachs to the list. They got 100% on the (taxpayer) dollar for the CDS they purchased from the bailed out AIG. This fraud will only come to an end with the 2nd coming of Jesus Christ.

  • Report this Comment On January 30, 2010, at 10:41 PM, grendeth wrote:

    The fact is no matter how bad the deal is, it is far too easy to repackage the goods and sell it to some one. Seems to me that the world is flooded with paper money and folks seems so intent on finding an investment for their monies.

  • Report this Comment On January 31, 2010, at 12:35 PM, TBVLurker wrote:

    Jesse2159:

    Jews have been around as a group over 5,000 years. They've found out the hard way that when you screw people over financially, you will pay the price. The one thing that Christians conveniently forget is that Jesus was a Jew. He took on the moneylenders and lawyers that infested the temple at that time. So don't blame the Jews, go after the greed. I'm sure you'll find many fine upstanding Christians in KKR, Goldman Sachs, and others being just as greedy if not worse. After all, Christians can go to church and be "forgiven" for their sins, and then they are free to go sin again. Just drop some of that fat bonus into the church's coffers, and you're completely forgiven.

    I'm a Catholic. I understand only too well that people who live in stained glass houses should not throw bricks. I suggest you look long and hard at your blind predjudice, as did I, and look at who benefits from this hate of the Jews. While you're foaming at the mouth at the Jews...you're being sidetracked from looking at the sins of your own leaders. Its a tried and tested method, practiced from Caesar through Rush Limbaugh. Read, ask questions, and THINK. It pays off because you don't get suckered.

  • Report this Comment On January 31, 2010, at 12:58 PM, blesto wrote:

    This is why I like to see significant insider ownership to keep control from institutional owners like KKR.

    The Fool should have this kind of info listed in the stats or its own tab.

  • Report this Comment On January 31, 2010, at 11:01 PM, tydi25 wrote:

    GOLDMAN'S intent is two folded here, Profit and aid an old fiend WALMART, by debt inpregnating DOLLAR GENERAL, they helped slow down a competitor that's been popping up all over the place, especially right next to walmart, and undercutting PRICES drastically! Now all of a sudden they UPGRADE WALMART! COINCEDENCE? Look deeper guys it's not! But it's not going to help WM.

    Even at $53 Walmart is overpriced! With it's "reorganization" and anewed assualts against it's workers (layoff's, anounced and unanounced and cutting hours to barely survivable levels) and customers (raising prices so much that it's not worth the extra trip to go to walmart rather than the store down the road) as well as attacks on vendor's, elimnating whenever possible, the company's management has alienated everyone possible! Customers are fleeing like never before, Workers are filing suits by the dozens, passing out union cards and flyers and even chasing away customers by telling them the truth about walmarts new philosophy, PROFITS AT ANY COST!! EXPECT A HUGE NEGATIVE when the company announces 4th QUARTER results, even after all the finagaling and "reorganization" (including some accounting moves) it's goin to be ugly! With the huge amount of price increases in the last few weeks, some to unbelievable levels, one can only assume it's a last minute trick to boost the books before the Jan 31st deadline! Really hope some analyst call them on that!

    By the way, Walmarts recent actions have done more to boost the unions efforts at all the stores in this area than the unions have been able to do in years!!!

  • Report this Comment On February 01, 2010, at 9:46 AM, swiver wrote:

    Manchester United all over again?

  • Report this Comment On February 02, 2010, at 11:36 AM, Eidels wrote:

    Wasn't Dollar General a Fool rec?

  • Report this Comment On February 02, 2010, at 4:36 PM, 11787HOT wrote:

    I keep telling everyone Goldman Saches is like selling your soul to the devil. They have done so much evil to the small investor while making Billions.

    DO NOT INVEST IN THEM. (PERIOD) You are paying

    more for food and fuel because. Why? They manipulate the markets. They did it with OIL Futures contracts. They made so many contracts that never got delivered. Prices went up. DUH.

  • Report this Comment On February 02, 2010, at 5:26 PM, Flygal5 wrote:

    You can buy a cash cow. Just don't buy one where the milk has dried up. The most basic homework would tell you the capital structure is completely different and no longer of interest.

    Ar e they scum for leaving the company crippled financially, yes. But they owned the company, they could do what they wanted. Employees could have owned shares themselves and blocked what happened.

  • Report this Comment On February 02, 2010, at 5:27 PM, Flygal5 wrote:

    You can buy a cash cow. Just don't buy one where the milk has dried up. The most basic homework would tell you the capital structure is completely different and no longer of interest.

    Ar e they scum for leaving the company crippled financially, yes. But they owned the company, they could do what they wanted. Employees could have owned shares themselves and blocked what happened.

  • Report this Comment On February 05, 2010, at 10:59 AM, jaketen2001 wrote:

    Fine article from TMF. This is why TMF is here.

  • Report this Comment On February 05, 2010, at 12:40 PM, WatcherAl wrote:

    Thanks for this insightful analysis. Every day we seem to get a clearer picture of what we have become as a nation, and every day it gets uglier & uglier. One Nation, Obsessed with Money, Where Anything Profitable Goes. A scary thought: even with a populist President elected to rein in this greed-based obsessive compulsive behavior, the Big Money still rules with impunity. Does this mean that all we need to do to forecast our collective future is to read about the Fall of Rome?

  • Report this Comment On February 05, 2010, at 12:45 PM, bluffguy wrote:

    TBVLurker: Thanks for a good post. After 18 years of Catholic education, the best thing I carried away was a teaching from one of the Brothers, " You cannot be a good Christian until you learn how to be a good Jew." Wish I could remember the Brother's name, but he surely knew his stuff.

    Meanwhile there are scum of all types trying to outdo the Enron and Worldcom gangs and they come in all flavors, religions, colors and nationalities.

  • Report this Comment On February 05, 2010, at 1:57 PM, 12sandwiches wrote:

    Easy with all the outrage. Sometimes a company's best use of future cash flows is to borrow against it, dividend the borrowings out to the owners so that they can invest it in other assets or buy stuff with it, and let the future cash flow of the company pay down the debt. If the debt bankrupts the company that is not a good outcome for the owners nor the bankers who lent the money in the first place. No PE professional or lender (bank) borrows or lends money if they don't think it will get paid back.

    It is not shady, chicanery, robbery or anything else mentioned above. It may be stupid but that is a different story.

  • Report this Comment On February 05, 2010, at 3:23 PM, MrArgentum wrote:

    "It is not shady, chicanery, robbery or anything else mentioned above."

    Baloney. It's securities fraud and dereliction of fiduciary responsibility. If we had an SEC that took its mission seriously, these guys would be under indictment.

    All of our investment activity and participation has to be based on trust - or there's no market. The erosion of trust in our financial system and those who operate it institutions is the biggest threat to economic well-being we face. This little story of ethical and moral rot is just one example of many in a kleptocracy trying to pass itself off as capitalism.

  • Report this Comment On February 05, 2010, at 3:58 PM, rmurphy23 wrote:

    Why time is it that every time theres a fraud involved, every time somebodys pocket gets picked, Goldman and Citi are lurking in the background surrounded in an air of innocence... and theres always some rump swab out there somewhere who will defend them and their rotten tricks as "free market" laissez faire capitalism in its purest form, like it was on the tablets that were handed to Moses. Just curious

  • Report this Comment On February 05, 2010, at 4:10 PM, artbros wrote:

    TBVLurker is right. Christians owe a debt of gratitude to Jews (and by that, I mean the whole house of Israel, not just the tribe of Judah) for preserving the ancient texts and writings of the prophets. They have labored and suffered much to protect the Torah, the wisdom of Israel and the prophets. For this we owe them a debt of gratitude. Every true believer in Christ should be especially thankful for their travails. We have benefited greatly to have the old testament and we would not have it without them. As a believer in Christ, am grateful to the Jews as a people. It is pitiful when people mindlessly smear "the Jews" when some financial catastrophe rears its head. It is utterly, completely and thoroughly wrong and we must work to rid ourselves of any vestige of that hatred.

  • Report this Comment On February 05, 2010, at 4:33 PM, thisislabor wrote:

    how is this a bad thing?

    they made their total return on their overall invested equity go up? from before the purchase to after the purchase? what's the issue?

    the difference of 4 billion they are just going to reinvest into some other spot in the US economy anyways so what's the problem people?

    you take 7b and make it into 11b. you now have 11b in working capital making more goods and services. the us people probably ought to be thanking them....

    just my thoughts.

  • Report this Comment On February 05, 2010, at 4:39 PM, jcoywall wrote:

    Amen to artbros! Let's stick to the facts that Wall Street is full of unprincipled individuals and it's up to us to sift through the dross to find the gold.

  • Report this Comment On February 05, 2010, at 6:18 PM, james27613 wrote:

    Just look at how they raped Simmons mattress company, forced it into BK.

    http://www.cnbc.com/id/33177139

  • Report this Comment On February 05, 2010, at 6:27 PM, james27613 wrote:

    Take a look at Hertz, they go private LBO,

    then go public, then LBO again.

    After LBO, they pay all Sr. Management bonus money about $1 billion. Guess what, another IPO!

    IPO and they plan to use proceeds from IPO to

    pay down debt, $1 Billion.

    Amazing, only in America.

    Other poster is right, SEC should put a stop to these

    flim flam man get rich quick schemes.

  • Report this Comment On February 05, 2010, at 6:27 PM, james27613 wrote:

    Take a look at Hertz, they go private LBO,

    then go public, then LBO again.

    After LBO, they pay all Sr. Management bonus money about $1 billion. Guess what, another IPO!

    IPO and they plan to use proceeds from IPO to

    pay down debt, $1 Billion.

    Amazing, only in America.

    Other poster is right, SEC should put a stop to these

    flim flam man get rich quick schemes.

  • Report this Comment On February 05, 2010, at 6:40 PM, james27613 wrote:

    Amazing how easy it is to borrow money and rape a company.

    This sort of financial engineering, known as a dividend recapitalization. From 2003 to 2007, 188 companies controlled by private equity firms issued more than $75 billion in debt that was used to pay dividends to the buyout firms.

  • Report this Comment On February 05, 2010, at 8:24 PM, vector242 wrote:

    Thanks for a great article. This kind of stuff is valuable with respect to "making" money, as in, there are those whose dystopian, in-human, anti-human, reptilian debauchery consists of only 'taking' money -- avoid them at all costs -- and beware their nominal, primitive, tactical derivative plays to further suck the life blood out of retail investors/traders, real producers/innovators, and other positive individuals/entities in this jurisdiction. These life-wrecking lowlife KKR cs'rs, mere nominals, certainly unreal creatures, suck the life blood out of retail traders (ex; watch OOTM huge volume options plays in an up-trend stock that controlled funds are only too desperate to acquire at gratuitously cheap prices, or short the spit out of and dievest [sic]/suck good "trend is your friend" build money from initial and medium term sector rotation investors -- reptiles can never spot trends, build, make money... only warm-blooded creatures can), real producers/innovators, basically the whole jurisdiction, particularly during dievestment [sic] bank/consumption/extraction cycles. Their argument? The cycle/entity was/is obsolete, therefore, we are dievesting [sic] it (of course to said dystopians' gratuitous benefit at only nominal paper expense, at everyone else's real expense), thereby making the system more "efficient." Really they maintain an inefficient, obsolete controlling caste grip. Hey, greed is good, right? WRONG! See Scripture and Elementary Logic 101, limbic losers. Isn't "free" trade/market/lunch/free for all? Hell no! Merely for "suite" On The Street crocodiles employing in-the-swamp tacticals such as emotional "intelligence" manipulation, arbitrage differential dievesting [sic] (distinguish from investing), sewage spewing in a cesspool/fire cellars in hell (note their counterparts in the street -- two sides of the same coin) who use infrared vision to stalk and prey on strategic, intelligent, warm-blooded beings on Earth. Newsflash to NFender above: they do NOT own debt, per se, certainly principals/agents in/of said bookie-bank "firm" do NOT "own" debt -- said "firm" does, and, DUH!!! OPM downpayment + derivatives: CDOs, CDSs, and related obtain further defraction, conflation, etc...; furthermore, boilerplate bank/dievestment [sic] takeover "firm" contract law, etc = Complete Insulation/Separation From Real Debt For Nominal Principals With Upside "Profit" Potential Only, No Downside Risk At All 101 -- essentially, all OPM -- basically similar to, though far better than, a bookie operation -- ie, little or no money down, huge guaranteed $$$ return, no physical risk -- basically Money Mint 101. At end cycle, many of these fraudulent operations invevitably collapse. USA and other jurisdictions now carry this debt upon default of said organizations on the theory that collapse of financial "system" ie, markets would take out the whole society, with ensuing chaos crisis and "huntin' time." This represents dievestment [sic]/consumption/extractive redistribution not based upon real production, a micro-communist nominal capital stasis with ensuing hyper money-print and borrowing to fill in some of the void (see Weimar), almost inevitable hyper-UCD/hyper-micro-induced (far worse than macro-induced) inflation. Dynamic capital toward real investment/production/earnings/learning/innovation is of real value. Profit is worthy, but so is production, more than consumption, particularly as ratio within GDP equation; exogenous over endogenous supply and demand, and real fashion/consumption. To nominalize this value to the gratuitous benefit of price level with insufficient support torpedoes an economic system into a dysfunctional market which finally collapses into hyper-debt, as in -$20 Trillion USD, 11/2008 -- the last stop? If the DJIA, among other indexes, and the vast majority of other indexes/securities collapse via the chicanery of frauds like KKR, particularly in this jurisdiction which is at war, then likely no guarantees forward. Forget about conflating the issue, or trying to do turn-about and sell central corps organization contribution canard. In the end, hyper-debt gravitational suckhole does not equal Sunstar efferent production/earnings unity -- the daze of "free letter of credit float, get it back on the retail side" are over -- time to build a new fulcrum, regardless of cost -- the daze of "real property and hamburger flip" are gone; for proof, note the sectors with best returns in the equity markets over the past year's period. Put down your proverbial shovels and pick up a real shovel and head back to the Jurassic Period and clean up the T-Rex spit, subversive KKR slumbags. Don't blame me or others for calling parties engaged therein; activity of said parties so indicated, thereby implicated, ie, look in the mirror, in real, not nominal terms -- furthermore, though the way to progress is inarguably never a smooth road, dislocations via hyper-equity/earnings divergence of this surreal unilateral market stasis have caused billions to tragically perish with major loss of contribution over the generations, during and after cycle stasis, from deprivation during/after and in tragic death in the wars that ensue. It's amusing to see some claiming off-shoring "rights," then see the scaredy-cats jump into the dollar, worldwide, when the going gets tough and they short (DJIA free-fall) this jurisdiction at the same time they demand "free" (USA DoD Pfc, with cz diff'l = $18,600 per annum, essentially minimum wage) protection. That's really what is meant by "free" trade/market -- lunch. BTW, that is the full faith and credit, backing the dollar and and underpinning the system otherwise, of US line citizenry and DoD. In the end, who you gonna call, ghostbustahs? "Tommy," Rudyard Kipling "...you bet that Tommy sees!" Been seein'...

  • Report this Comment On February 05, 2010, at 8:57 PM, vector242 wrote:

    thisislabor -- do you know the difference between paper and real profits? Efficiency vs obsolescence? Dievestment [sic] vs investment? Production vs consumption? Earnings vs extraction? Innovation vs derivation? -0- and -$20 Trillion USD, 11/2008? As in, the complicit got much of the positive -0- side of that spread; We, The People, got banged with the negative side. Believe it or not, with access to the Fed -0- window, the financial talentless actually take bonuses for their "handiwork!" Have you yet figured out that the "money," at least as representing real value was actually NEVER THERE IN THE FIRST PLACE?!?! (Aristotle: "Nature abhors a vacuum." Note market collapse -dy/dx, Fall, 2008, subsequent TARP Fund injections... The quantitative model can be accomplished in somewhat higher order arithmetics, but no use... have you ever played 3 Card Monte, watched or played decreasing odds backgammon with higher stakes/higher return? Why are you commenting on this page in the first place if your basic understanding of elementary economics is that lacking? Is it rhetorical to ask wherefore USA Financial Condition 11/2008 & After 101 -- as in, answered by, DUH!!! (A priori short strongly evident).

  • Report this Comment On February 05, 2010, at 10:35 PM, vector242 wrote:

    james27613: that is the term of "art:" "dividend recapitalization." Still, mere chicanery and attempted sleight of hand to the extent that hyper-leverage with nominal financial "instruments" on real macro-Newtonian value of said corporation, ie, price-to-book with not simply a huge new multiple, but a gigantic spread between fantasy and reality. The perpetrators play that spread into their own pocket, ultimately to the detriment and the subversion of the jurisdiction, as in, -$20 Trillion USD, 11/2008.

  • Report this Comment On February 05, 2010, at 10:53 PM, vector242 wrote:

    tydi25, thanks for that detail on GS bang-down on Dollar General in favor of WMT. Also, james27613, always good to get another analogue detail regarding 3 card monte/find the pea under one of the 3 cups flip 101 re dievestment [sic] bank nominal paper go private/go public/consolidate & concentrate paper profits with short-lived balance-sheet/share price rise chicanery shuffle of real assets/production/profits/lives/national security. And this is called efficiency, especially post 11/2008?!?

  • Report this Comment On February 07, 2010, at 7:19 PM, annonnamuss wrote:

    Once in a while I read Motley Fool and this is the impression I get. The Motley Fool people pick a stock that looks promising and invest in it. Then they tell their readers how wonderful it is, and the readers go out and buy it. Surprise, surprise, the stock goes up. Now Motley Fool can say, "Hey, didn't we tell you?" Readers then buy more and others jump in and the stock goes up even more. I don't know much about the stock market, but would this be considered stock manipulation?

  • Report this Comment On February 08, 2010, at 7:27 PM, zonadude wrote:

    This is yet another great expose by Motley Fool. Unfortunately, the financial model that this article discusses is business as usual for many private equity firms. See also: Mervyn's.

  • Report this Comment On February 14, 2011, at 7:39 PM, MiamitoIbiza wrote:

    Guess (GES) at this point is still under the media radar but with earnings tomorrow it definitely has the potential to stand out. The stock may have already blazed an amazing path but we feel it still has sufficient upside to deploy capital on the name.

    At this point it would most likely be better to wait and see what the firm reports and the guidance it provides given earnings are literally tomorrow.

    We definitely take a bullish stance toward Guess (GES) though before earnings and hopefully we will be right. You can check our analysis of Guess below

    http://seekingalpha.com/article/252759-guess-ready-to-benefi...

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