Tuesday, December 30, 2008

Following up on Morningstar's claim that Forest City Enterprises stock would be worthless

When Morningstar recently said that Forest City Enterprises stock was likely worthless, it took several days--even after it was picked up by the Washington Post--for FCE to respond forcefully, plausibly stressing that the consensus of other financial analysts was that the stock should be a buy.

Since then, there's been some interesting criticism from an anonymous financial analyst commenting on Cleveland journalist Jill Miller Zimon's blog Writes Like She Talks.

Among the comments about analyst Matthew Coffina, who graduated Oberlin College in 2007 with an award in economics and is a Level 3 Chartered Financial Analyst candidate:
The kid, and I emphasize kid who wrote this article has very little experience as a securities analyst... and operates as a generalist i.e., he has no particular expertiese in the real estate industry....

FCE/A has said that Morningstar never contacted them. No analyst puts out work w/out talking to company, because quality of management is always a key factor... The point is i’ve been a securities analyst for 15 years and studied FCE/A and it’s tough for me to get my head around the b/sheet. I think the level of analysis done was superficial, and there’s no way that guy has the industry experties to make that opinion. Now, the outcome may make him look brilliant (we are in severe recession) but I mean seriously there’s no analysis there.

[quoting] "during the next three years, Forest City could face severe financial distress, since it may need to refinance debt at ever-increasing interest rates while operating cash flow declines.”

How is this different than any other REIT? Did the analyst notice that the rates FCE/A has been getting on refinancing have actually gone DOWN.


As I suggested, maybe the Morningstar analysts and the others cited by Forest City can (intellectually) duke it out.

Hamhanded response?

Miller Zimon scoffed at the commenter's suggestion that the analyst's dis went under Forest City's radar:
I completely disagree that FCE didn’t know about Morningstar. Please. If they aren’t following what entities like that write or say about them, even at the most basic level through clipping or some other mechanism, then maybe they deserve whatever happens as a result of the publication of such information. This is the news age where people can find anything as much as say anything.

Morningstar's report was actually out for a couple of weeks before it was picked up by the Washington Post.

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