Not such a pretty picture…
Back on March 27, 2006, I footnoted Spectrum Brands (SPC), which makes Rayovac batteries and Remington personal care products, including these products endorsed by Cindy Crawford. At the time, I questioned the company for providing an overly rosy view of its five year performance in its proxy statement. My key point was that companies that find a need to airbrush something that’s relatively easy to fact-check are probably playing around with other numbers that are much more difficult to dig through.
While there hasn’t been any charges of accounting fraud that I’ve come across (though there have been two shareholder lawsuits alleging various problems), there’s been something of a revolving door when it comes to management. And, there’s the stock price which has declined about 80% from $21.65 on 3/27/2006 to its current price of just over $4 a share.
I was reminded about all of this when I saw this 8K that Spectrum filed late Friday. In theory, the filing provided the details of the separation agreement between Spectrum and former CFO Randall Steward, whose departure was announced back in June. But just like the earlier 5-year chart, the separation agreement was airbrushed so that investors couldn’t get a bottom-line figure on the total value of Steward’s parting gifts. Once a company starts futzing around with one set of numbers, what’s to stop them from doing it with others?
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August 6th, 2007 at 1:38 pm
Nice findings. It’s really important to dig deeply in a time when consumer goods are way out
of favor. Trigger happy traders might think, oh here’s the play! Then the Axe comes down.
Also of note is 95% institutional ownership.
So if it does crater SPC could become a REV or
Sunbeam quickly. Plus lot of retail brokers don’t allow shorting.
SPC has 95% institutional ownership. If that mass wants to get out all at once..down comes
the Axe controlling the trade.
Anyway thanks a lot for covering a sub $5 stock. They can be real quicksand and one has to learn
to deal with that temptation only to see a REV or Sunbeam occur. Learned lesson on old BNBN
from Barnes & Nobel. Took years to get even. Granted a rare 0.75 makes a recovery but it
must happen quickly like LU, Staples, Corning or Wet Seal. Otherwise just does R/S or dies.
From Reuters research:
“Because the earnings of SPC are not available, the Price to Sales and Price to Book ratios are the most appropriate valuation measures. Therefore SPC seems valued at a discount with a Price to Sales ratio of 0.121, one of the lowest in the Electronic Instr. & Controls industry, however, their Price to Book is 1.021, below the industry median of 1.88. ”
August 6th, 2007 at 8:32 pm
Good job. I think we’re almost expecting some sort of shenanigans when it comes to reporting numbers. Lots of companies are underpromising and lowering guidance, then beating it by a penny or two in their earnings report. The stocks soar. Amazing.
August 7th, 2007 at 1:28 am
I have to agree with muckdog. It is quite amazing how companies can play the market the way they have been, underpromising then beating earnings and having their stock take off. It is amazing that more investors don’t see through this practice.