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Strategies & Market Trends : Value Investing

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To: Michael Burry who wrote (1507)	7/9/1997 5:58:00 AM
From: Jeff Maresh	of 78673

Hi Mike - Re: CBI - The Barrons article has the skinny on CBI. Since they were just spun off of Praxair, I'm not sure how you did a year over year comparison unless you used the numbers in the Prospectus. Shafer notes in the Barrons article that they were writing business at break even. The PE is definitely misleading because 1) they don't have much history on their own and 2) earnings are negative. As for ROE and ROA, what industry did you look at for comparison? I think these guys are a specialty company whose primary competitor is Flour which is diversified so I'm not sure what a fair comparison really is. Also, the low margins on this kind of play are actually good. The goal is to improve margins significantly through international business and they are demonstrating that this can be done. So in this type of situation, low margins are good and it's reflected in the PSR. I'm still not convinced myself I want to play this one but I will be looking over more material this weekend. >>>>> On most standard value ratios, it is at or above the industry average -- even if one doesn't include the PE, which granted is misleading. Yet its ROE and ROA are much less than the industry average. Further, the company is experiencing falling margins due to product mix changes -- not a transient thing. <<<<< I didn't see the article but in the past, this has been a lot of media hype. Until they've sold a few and posted standard benchmarks, I'm a doubter. I think this is a good sign for SGI since at least somebody now sees SGI as a competitor. This hasn't happened in the past year. >>>>> What do you think of HP's news that it is taking on SGI with machines orders of magnitude faster? <<<<< Regards Jeff

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