When the dot-coms and telecom melted down a few years ago, there was a reluctance to restate the value of assets on the books by the major players. The Sarbanes - Oxley act of 2002 made sure that companies reported correctly. Thus you saw some serious markdowns, like Global Crossing, Worldcom, Sprint, and Cisco taking billions off of their books.
So where are the homebuilder restatements? The bubble blowing means it's a blue-light special folks, and your land and buildings aren't worth what they used to be (hello $100,000 off Centex Sales!). Plus your inventories are swelling as your unsold homes sit and gather dust (until your firesale price 'em).
Time to fess up and adjust those books. Or there could be some jail time for your C-levels (Bob Toll in a nice orange prison jumpsuit - now that'd be a sight)
Yes, the desire to avoid or delay stock losses in the C-level suites of these builders (hello Bob Toll) until they can dump the rest of their stock is probably great. But hey, Bob and Bruce Toll, nice work, you've already dumped a hell of a lot of your shares at the peak last summer, don't be greedy now! Restate those assets already.
Here's some thoughts on inventories:
Bulging Inventories Spell Trouble
Nonetheless, when a company's inventory turnover rate starts to slow from its historical levels, investors should instantly look for signs of swelling inventories as an indication that sales of the company's products are beginning to slow.
As a result, a slowdown in sales can have an utterly devastating impact on the stock price. In short, maybe those warehouses full of unsold products aren't worth as much as the balance sheet says they are -- which would mean the company's real book value per share might be less than it appears to be.
So, here's Toll Brother's inventories:
Inventory: April 30, 2006: $5,939,352,000
Inventory: October 31, 2005: $5,068,624,000
Looks like a markdown on aisle five to me, Bob.
Here's the insider sales this summer by greedy Bruce and con-man Bob - nearly $200 Million cashed in by the greed brothers, yup, right at the tippy tippy top... nah, they didn't see this house of cards collapsing and bail, just a lucky guess I guess...
TOLL, BRUCE E.Director
620,000
Direct
Planned Sale
$26,040,0001
12-Sep-05
TOLL, ROBERT I.Chief Executive Officer
292,000
Direct
Option Exercise at $4.3282 - $4.5 per share.
$1,289,000
25-Jul-05
TOLL, BRUCE E.Director
400,000
Direct
Planned Sale
$22,400,0001
25-Jul-05
TOLL, BRUCE E.Director
387,000
Indirect
Sale at $56.0257 per share.
$21,681,945
25-Jul-05
TOLL, ROBERT I.Chief Executive Officer
133,000
Indirect
Disposition (Non Open Market) at $56.6169 per share.
$7,530,047
22-Jul-05
TOLL, ROBERT I.Chief Executive Officer
673,300
Indirect
Sale at $57.125 per share.
$38,462,262
21-Jul-05
TOLL, ROBERT I.Chief Executive Officer
193,700
Indirect
Sale at $57.0893 per share.
$11,058,197
21-Jul-05
TOLL, ROBERT I.Chief Executive Officer
1,000,000
Direct
Planned Sale
$56,000,000
15 comments:
if they sold knowing insider information that sales were drying up before releasing that info to the market, they're toast
wo-wo-whoa... waitasec... they reported $5M and $6M in inventory? That's like 4 or 5 (as in, count-on-one-hand 4 or 5) Toll houses. What, they're not "done" until they're in escrow?
Something's dead up the creek. I think you're on to something here, Keith.
Wait - just found the "(Amounts in thousands)" part. So they've got $5 and $6 Billion in inventory. That's more like it.
Now, what does one company do with an extra BILLION dollars of inventory and decreased sales... hilarity ensues?
i'll add the zeros to make it easier to glean
the key is the rising number - unsold houses, and overvalued on the books
looks like you've found a sure thing keith.......you should short TOL!
i took the opposite side, took a LARGE one day long position on TOL late yesterday at 28.76......I am betting it will go UP, UP, UP today
one of you chicken littles should put take a 85k short to balance out my long
if they sold knowing insider information that sales were drying up before releasing that info to the market, they're toast
Very hard to prove. And they generally don't need to say anything until the quarter is just about over with, if they are going to miss their earnings target badly.
What would get them in really hot water is if they backdated the options for maximum return, or if they made public statements that are later proven to be blatantly false. Note that I said "blatantly" --- otherwise, again, it is difficult to prove a conspiracy to mislead investors.
My favorite, however, is when they meet earnings targets because the CEO wrings the neck of someone in accounting to "massage" the numbers. That would be a train wreck for the CEO and the company. I don't believe that is happening here however.
I'm sure the analysts are wondering if they will revalue their inventory, and will question them on it.
I should add that insiders selling stock while telling others, "Hey, buy our stock, it's a great deal" will get them in trouble if the stock tanks hard. I don't know if Bob Toll ever said something like that.
But Ken Lay sure did.
WLS is buying back shares - some on the stock message boards are saying that is so they can take the company private and shred the documents.
If you want an example of how the CEOs sometimes operate look into the old Loral and a man named Schwartz. This case is a classic. BTW, BK is not a problem to them. BK court is the playground of these guys.
look at the little people talking
Do you remember Bob Toll pumping pumping pumping in a huge feature spread in the New York Times last summer?
He talked how the whole nation was going to have house prices reach a "permanently high plateau" (in those immortal words) and we would be henceforth like Britain?
And then he sold off gazillions of his shares.
Sign of a top:
------------------------------
Sept 8, 2005.
DISPLAYING FIRST 50 OF 735 WORDS -The Metropolitan Opera's radio broadcasts, which have spread the gospel of opera for more than seven decades but were threatened by a lack of financing, have won a temporary reprieve. A home-building company made flush by the housing boom has agreed to sponsor them, the Met said yesterday. The...
---------------------------
Remember when Texaco was the sponsor for the Metropolitan Opera broadcasts for, what 50 years? It's now the Toll Brothers broadcast.
Great for opera. Sucks for shareowners who aren't Bob Toll.
Come on guys. I don't think Keith is trying to point out any overt conspiracy or law breaking. But this information does make it pretty clear Toll Bros' own "smart money" was playing the exact opposite of their continued upbeat statements about the housing market. Which is exactly as you would expect if the Toll brothers are self interested... which they are.
And as for the inventory mark-down, when it comes, the Brothers themselves will be high and dry.
The lesson? Look at where the smart money is going. It makes things a lot more clear. Everything else is hearsay or propaganda.
keith, if you went back in time just another 3mos prior to what you looked up the actually sold close to 1/2 a billion worth... $$$$500 million. that is millions and millions and millions and millions of dollars.
hey -- don't blame them, it costs money to live.
Gotta have a place to get away and relax (check -- setting a new price record in Florida, at the time)
Gotta have a place to test drive the new wheels (check -- the largest auto dealer in Philly -- Reedman Auto -- complete with a test track)
Gotta have a newspaper in the morning to relax with over a cup of coffee -- it clears the mind (check -- purchased Philly Inquirer last week, as in the entire paper)
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