Gencor Industries – Net Net investment

Gencor industries write up on this blog describe the investment thesis still intact.
You may find them here:

Gencor is for sale.. for free

Gencor Industries

The thesis must be updated but is is still valid.  Here are the numbers from Q1-2012.

Q1-2012 Margin of safety
NAV 100 47%
NCAV 91 33%
Net Cash & Equivalent 71 4%

Just on an earning standpoint, the operations are still negative but investment portfolio conterbalance those losses. Until this cyclal industry comes back to an high, we have major downside protection. Before 2008, net incomes were over 1.5 per share. If we can expect this amount in a year or two, I’m still in.

Disclosure : Author is long GENC.

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Posted in GENC
3 comments on “Gencor Industries – Net Net investment
  1. Nate Tobik says:

    Hey,

    I saw your comment about GENC over on the Whopper blog. I researched Gencor and passed, way too many red flags for me. I posted a few unresolvable questions I had to Whopper but he never responded. I’m going to paste them below, just something to consider.

    I would also HIGHLY recommend going through the 10-K and all financials and seeing if you can get all the numbers to add up. I and another investor did this, way too many things show one number on one page, and a different number on a separate page.

    1) The company reports changes in marketable securities as operating cash flow. In addition they report their acquisition and sales of marketable securities as operating cash flow. GENC is not a financial company so I’m not sure how this is valid GAAP accounting. This should be investing cash flow.

    2) The difference in carrying value for the investment portfolio only fell $841k between 2010 and 2011 yet there is a $2.553m change in marketable securities value in the cash flow statement. I can’t reconcile this, so either the cash flow is misstated or the carrying value is incorrect.

    3) There was a class action lawsuit back in 1999 alleging securities fraud and financial misstatements. The current management was in place back then. The lawsuit was settled but there is a lot of information in the dockets alleging the same sort of behavior we’re discussing on the blogs here. At the very least this sort of questionable stuff has been going back more than a decade.

    4) The public accountant didn’t review any of managements controls this past fiscal year.

    I also found another blog post detailing a lot more questionable items, it might be of interest: http://tfideas.blogspot.com/2010/10/is-gencor-accounting-fraud.html

    I would also recommend you read the lawsuit filings from the alleged securities fraud back in 1999. A lot of the stuff they’re doing now is what they were accused of then, the SEC just papered over it. I don’t trust the SEC much in detecting fraud. The same management is in place now that was in place then.

    There might be a LOT of value here, but there were way too many red flags for me. I’d be interested in hearing your thoughts on some of the issues above.

    If following up via comments is clunky (understandable) you can also email me at oddballstocks–gmail.com.

    Nate

    • Dominic Nadeau says:

      Hi Nate,

      I’ve missed those errors in numbers and looked at some today and found out that there are HUGE accrual difference in a year from another. I’ll investiguate that too.

      Thanks for the info.

    • Dominic Nadeau says:

      New post on gencor is available. I’ve sold off everything. Thanks

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