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August 11, 2006

The Cara crystal ball at work, Fri., Aug. 11, 2006, 11:55 AM

I have been busy putting teams of volunteers in place to study certain stocks for subsequent reporting to my readers. Yesterday eight of you saw a home run in terms of my timing abilities.

At 9:36am I sent out a note to one individual I thought might look into the financials of Bally Total Fitness (BFT). Then at 3:59pm I mailed a summary of my full knowledge of that company to the team of seven that I had picked for this task of investigating the Company. The stock closed at $3.95 yesterday.

I wrote to these eight volunteers:

"In Sept 2005, the stock took off from about $3.40, to go all the way up to almost $10 in 7 months. But whatever drove it, has run out of steam. The share price will likely fall back to the very low 3's and maybe the 2's. Yesterday it hit $3.50, and RSI on the 30-minute data almost hit zero, which I haven't seen before. Volume of selling was huge.

There are now senior management changes. Apparently the new CFO is interim, which suggests that somebody is putting a plan in place to re-organize the company."


From the prior close of $3.95, this morning BFT opened at $2.78 and dropped immediately to $2.51.

The reason?

Breaking news on Bally from MarketWatch:

8:30am 08/11/06
Bally Total CEO/chairman/president resigns

8:29am 08/11/06
Bally Total fails to find potential buyer, seeks alternative

8:28am 08/11/06
Bally Total expects 2006 cash contribution down 10%-20% -

You see, my crystal ball was working.

After I assess the process of starting a new reader service ("Cara Investment Reports") for small cap companies, based on two dozen volunteers at this point, I'll streamline a selection, investigation and reporting protocol.

Then with the help of the immense human capital that is now linked to this site, I'll set up that Virtual Investment Club I wrote about some time back.

I just think that the work that we do for ourselves will be outstanding " unsurpassed really. I am quite looking forward to sharing this resource with the readership.

Remember: the market is us.

Posted by Posted by Bill Cara on August 11, 2006 11:55:48 AM | Category: Community Chat

Discourse

I started following Bally's when it hit its lows. 2 private equity groups bought in, and had big plans. It's stock did very well for a period.

Now, what's next? They are the biggest US health club operator. You'd think someone could make something big out of that ... I'll be interested in your report. Is it bankruptcy time? Will their bonds be accessible, understandable to "we the people"?

Posted by: Jock [TypeKey Profile Page] at August 11, 2006 1:18 PM [link]

I don't know a lot about the financials of this company. But, as a person who has gone through the hassle of finding a gym a few times over the recent years, and asked around among a lot of friends, I can tell you this: Bally's has a very, very bad rep. Shady contracts on joining, difficult to quit, substandard properties, etc. I'm looking for a new gym now and wouldn't even consider them, based on word of mouth and friend's experiences.

I realize that my subjective experience does not define a company, and maybe this comment is too "real world" for a financial blog. But I am never, ever surprised when I hear this company is doing poorly.

Oh, and Bally's v. Faber was a precedent setting case regarding "Sucks" sites. I realize that case took place a while ago, but that's not something I'd want my company to be famous for. Again, no surprise.

Mike
NYC

Posted by: MikeNYC [TypeKey Profile Page] at August 11, 2006 1:37 PM [link]

No surprise to see the President gone. Poor fundamentals all the way around: cannot file their fiancials on time, restatement of past financials, slowing revenue growth, CFO canned, material weakness in internal controls....Any one of those things would have been a red flag. Having earned a check mark for each only earns one a merit badge in ignominy.

Posted by: Leisa [TypeKey Profile Page] at August 11, 2006 2:32 PM [link]

I am surprised no one mentioned Sir Richard Branson when talking about Bally's! I thought he owned some it already, but I googled it and I guess not.

Watch for him to swoop down from Virgin Heaven and scoop up Bally's.

Posted by: BaZZa [TypeKey Profile Page] at August 11, 2006 5:53 PM [link]