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Lets say, the stock gets out of the starting gate at $15 and rises to $25. I might sell an $15-18 put against it, collect the premium, and get long the stock. Selling a put is like a limit order to purchase the stock (but where you commit to that price). If it never gets below $18 (if you sell an $18 put), you collect the premium but don't get long the stock. If it falls to $12, you lost $600 on the deal less the premium received. It is exactly like having bought the stock at $18. By the way, I would buy an option spread (i.e. maybe a 18 sale and a 7.50 to $12.00 purchase) and deposit the money to cover the position; $1,050 is the necessary deposit for the $7.50 put and $600 is the necessary deposit for the $12 put. In order to sell puts directly, you need at least $50K and I bet a lot of people here don't have anywhere near that, I included. I think shorting the stock is too risky, but it makes sense in principle. You may want to buy a call option at $20 if the stock is at $15 to cap your losses at $500 plus the cost of the option contract. If it is $15 and zooms to $25 and you put the short on at $25, maybe you buy a $27.50 or $30 call to hedge against significant losses. Or, if the puts aren't that expensive, maybe you buy a put instead. Remember, with the call option contracts, you still have to pay the dividend for the short position but with the put contract, you don't need to pay the dividend (i.e. since you are not directly shorting the stock) so that needs to be calculated into the situation. For any I mention, you need a Level III clearance; with the short, you need a margin account so you might as well apply for a Level III rather than a Level II clearance. Any speculative option purchase requires a Level II clearance (i.e. buying calls or buying puts). The short put, at Zecco, requires a Level IV clearance. Personally, the put spread is a good idea because it allows you to limit losses. Best wishes. You really need to see what they settled on in the bankruptcy. GM is a good deal if they settled on between 23-27 cents on the dollar assuming 100% ownership. It all depends on how the contract is worded. If the union has 75% of the ownership, than you really want a debt level that is 6-7% of what it was prior to the bankruptcy in order to consider it a good deal. Anything more and they are very likely to fall right back into bankruptcy, this time a Chapter 7 liquidation. I really think GM hasn't streamlined their operations. I own 21 shares of Ford (F). I think the GM brand should have two primary brands: Chevy and Buick. Buick has a very large international business especially in China whereas Chevy is more of a low-end business (except for the Corvette). Since there isn't that intelligence, I really still like F, HMC, and TM better; F is actually the best buy. I think it is essential to have people who know how to run a company. Good deal = 27% * Percentage of Existing Business Model = Maximum Acceptable Debt Level So if the company kept 65% of its former operations, than the maximum you should accept for debt is .27 * .65 = 17.55%. If they kept 15% of their operations, than the maximum debt you should accept compared to the existing company is 4%. So if they had $200 billion of debt and $100 billion in assets, it would mean that they now have $15 billion in assets and $8 billion of debt. Remember some assets are illiquid so it won't sell for anywhere near 100 cents on the dollar, thus the importance of having a lot more assets than liabilities. If they trade at 1.5 times book, you are talking about a $10.5 billion company. If they have 700,000,000 shares, you have a company trading at $15 per share. The actual amount is $82.3 billion and the debt is $173.4 billion. So if you have 15% of the assets, you are coming up with $12.34 billion and 4% of the existing liabilities equals $6.94 billion or a company with a assets/debt ratio of 1.78. Always watch inventory, receivables, and intangible assets. These can become obsolete, become uncollectible, or deplete, respectively, in relatively short order and can cause a company significant difficulties. Also, be sure to make sure the company has more assets than liabilities. Lastly, make sure that a company's operating cash flows are in the right direction. All of these can doom a company. A company usually goes out of business when 1) it runs out of cash, 2) it cannot pay its burgeoning debt, 3) a company is consistently losing money, and 4) a company is a slow grower and the business becomes a non-entity. All four can result in a significant loss of principle. This doesn't include every situation that can cause a company to default on its obligations, but I try to give a couple ideas as to what to look out for and not be complacent. The most important thing is to remain diversified and to always seek out opportunities with reasonable risk and with an amount of capital that you can afford to lose both monetarily and emotionally. While owning 1/2% is nice, maybe owning 5% is too much. Moderation is key. | Balance Sheet | Get Balance Sheet for: |
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| View: Annual Data | Quarterly Data | All numbers in thousands |
| PERIOD ENDING | 31-Mar-09 | 31-Dec-08 | 30-Sep-08 | 30-Jun-08 | | | Assets | | Current Assets | | Cash And Cash Equivalents | 11,448,000 | 14,053,000 | 16,007,000 | 19,554,000 | | Short Term Investments | 132,000 | 13,000 | 67,000 | 1,150,000 | | Net Receivables | 7,567,000 | 7,711,000 | 9,461,000 | 8,946,000 | | Inventory | 15,036,000 | 16,405,000 | 21,226,000 | 22,413,000 | | Other Current Assets | 2,593,000 | 3,142,000 | 3,511,000 | 3,576,000 | | | Total Current Assets | 36,776,000 | 41,324,000 | 50,272,000 | 55,639,000 | | Long Term Investments | 2,447,000 | 2,860,000 | 4,573,000 | 214,000 | | Property Plant and Equipment | 38,000,000 | 41,877,000 | 45,048,000 | 47,842,000 | | Goodwill | 242,000 |
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| 676,000 | 1,070,000 | | Intangible Assets |
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| 265,000 | 273,000 |
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| | Accumulated Amortization |
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| | Other Assets | 4,736,000 | 4,623,000 | 8,676,000 | 30,267,000 | | Deferred Long Term Asset Charges | 89,000 | 98,000 | 907,000 | 1,014,000 | | | Total Assets | 82,290,000 | 91,047,000 | 110,425,000 | 136,046,000 | | | Liabilities | | Current Liabilities | | Accounts Payable | 55,242,000 | 24,827,000 | 61,798,000 | 67,470,000 | | Short/Current Long Term Debt | 25,556,000 | 18,472,000 | 7,208,000 | 8,008,000 | | Other Current Liabilities |
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| 30,635,000 |
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| | | Total Current Liabilities | 80,798,000 | 73,934,000 | 69,006,000 | 75,478,000 | | Long Term Debt | 28,846,000 | 31,603,000 | 37,947,000 | 35,203,000 | | Other Liabilities | 63,166,000 | 69,027,000 | 62,466,000 | 80,959,000 | | Deferred Long Term Liability Charges |
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| 1,823,000 |
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| | Minority Interest | 622,000 | 814,000 | 945,000 | 1,376,000 | | Negative Goodwill |
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| | | Total Liabilities | 173,432,000 | 177,201,000 | 170,364,000 | 193,016,000 | | |
Stockholders' Equity
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| | Common Stock | 1,018,000 | 1,017,000 | 1,017,000 | 944,000 | | Retained Earnings | (76,703,000) | (70,610,000) | (61,014,000) | (58,470,000) | | Treasury Stock |
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| | Capital Surplus | 16,489,000 | 15,755,000 | 15,732,000 | 15,335,000 | | Other Stockholder Equity | (31,946,000) | (32,316,000) | (15,674,000) | (14,779,000) | | | Total Stockholder Equity | (91,142,000) | (86,154,000) | (59,939,000) | (56,970,000) | | | Net Tangible Assets | ($91,384,000) | ($86,419,000) | ($60,888,000) | ($58,040,000) |
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