Okay, to be fair -- Sam does lay out a decent (if overly lengthy) argument in his last post. I hadn't read it before posting my previous message, which is a general comment on his m.o.
The gist of it is, if I take a non-recurring charge of $100 million and make 10 million every year for the next 10 years... I haven't really run a successful business. In fact, the way attention deficits run on Wall Street, I could do that every 10 years and look like a very steady cash generator, save for very rare write-offs which everyone ignores because they are one-time events.
Funny thing -- a lot of public companies do end up having that kind of a track record. What's more, many hedge funds' business model seem to be built entirely on just that: charge 2 and 20 for 10 years, lose 2/3 of portfolio, blame it on high-sigma events, start new hedge fund for new suckers. Keep previous fees. Or if you are really ballsy like Goldman Sachs -- offer existing customers a 10-over-10 discount for putting in more money. Whatever you do, never ever return any fees. Just say you're sorry people lost money, if that. No wonder Sam has a good grasp of the tactic!
<IV has posted a good response, to which I would only add: if you believe that Overstock's missteps in 2005 will be regularly recurring -- by all means, invest in another company. In fact, if you price a company by repeating the latest pattern just after a turnaround, you will eventually inescapably end up at zero value. In which case buy some puts. The value I see in Overstock is predicated not just on the viability of the model but confidence in management making the right moves going forward. If they screw up every other year and do a real nice turn-around in between, that would mean I am very wrong.
