Loading up the truck, page-2805

I have a value investor's perspective, I only by companies facing temporary setbacks etc selling cheap as chips but ones I know will survive and turnaround.
This is based on quantitative analysis, that is things that can be measured directly. Specifically value investors look for companies selling below what they are likely to earn in future on the basis of past experience and look to the balance sheet as a measure of how strong a company is.
I mention this to distinguish myself from a growth investor who looks at qualitative factors like is this a growth industry etc. I only buy growth companies when the growth is available for nothing.
That's what got me interested in SGH last year, lots of bad news shareprice plummeting I thought great maybe an opportunity.
SGH's Australian business is a profitable one with a long track record of earnings. The company has grown by aquiring small legal firms and done very well.
In early 2015 the Quindell aquisition was hailed as a gamechanger for the company, much larger than previous aquisitions the analyst community was frothing at the mouth about the prospective profits. Hundreds of millions of dollars was raised from the public on expectations of great profitability to come.
I know that in 2009 Quindell was a golf course before it started aquiring unrelated companies from cleaning to legal services. Various views on the alleged fraud as mentioned most humourously by gotham city research.
So no value investor would buy a company where fraud is alleged in a reasonably convincing way like this. Even an expert in financial analysis would leave it well alone, if you can't trust the books you have nothing to stand on.
Buffets classic cockroach in the kitchen comes to mind; you may have stomped on one but don't think you have solved the problem.
The legal services business is the bit of Quindell that was aquired by SGH. However the Noise Induced Hearing Loss law firms that Quindell was purchasing are nothing like the reputable Australian business. They found an extremely profitable niche in these claims and expanded dramatically, this put the cost of insurance up and the government launched an investigation to change the law.
It is very easy for a company to report one or a few year of exceptional profits, that's why value imvestors ask questions like how long have they been around how do they do in tough times? That's the second reason why the company was never suitable for purchase, Quindell has no long term track record.
Now the chickens have come to roost and these concerns have been vindicated as the the company has acknowledged Quindell is nearly worthless and the debt from the aquisition is weighing heavily on them. In the latest results a negative cashflow, the company had more expenditure than income.
To recover from this situation the company needs to cut costs or grow it's revenue to bevome profotable (not return to profitability - an important distinction. Cutting costs could work but typically incurs one off redundancy costs which this company can't presently afford. So then a buyer of the business must think that they are going to grow revenue dramatically to turn the business around.
This would be the turn around of the century, seems like the onus is on the bulls to explain how the nature of this business model is going to change so dramatically in only a few months rather than the years this sort of thing usually takes.
As Bob Dylan said you don't need to be a weather man to know which way the wind blows.