Del Monte Pacific

[thor666]

To judge whether a stock is cheap or not, we need to give it a valuation. Once we have that number, it will be easier to see if it's really cheap (or not). Of course, there is no correct method to value a company and it can varies between individual.

Another fun fact to note for Del Monte , they were trading at $0.45+ before the rights price was announce. It dropped till 0.305 after the rights issue was completed. The company should be in a stronger position (more cash/less debt, less interest expenses) after the rights, but yet the price is even lower than before the rights. One of the prices quoted by the market has to be incorrect.

I always like to buy stock cheap, so when it hit 0.305, i am very tempted to buy, seems like those asymmetric payoff situation, lose little and win big. I think it is a good business with good cashflow, the only concern i have is the level of debt, just feel that if you have taking debt of X time, then your reward should also be X time, logical right? at least when buying 4D is like that. in this situation, i dont feel that the return is proportional the the increase in the debt, hence in the end i decided to give it a miss. right now it is 0.38, Looking back I definitely feel abit of regret. I think my theoretical MM theory proportional reward and risk thing is completely wrong, reason being, i have overestimated the volatility of the stock and underestimated determination of the Campos family, hence the risk is not as big as i think, i mean, yes, more debt, but might not mean more risk, as the business is good, it can generate cashflow to cover the debt under the most dire circumstance, so it is not like 4D or some theoretical MM theory proportional reward and risk thing, that is a mistake I have when I gamble too much and forgot a stock is a business

More shares and more perceived risk of yet another rights issue coming.

I suppose another way to look at it is to ascertain whether del monte can pay their loans given the still high levels of debt. I personally think this is not a short turnaround story.

Sent from my D5503 using Tapatalk