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Strategies & Market Trends : Value Investing

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To: James Clarke who wrote (14304)	4/11/2002 11:35:23 AM
From: TimbaBear	of 78744

Hi James Regarding AOL... I looked at it the other day and just can't justify a purchase anywhere around the current prices. I get a NetNet valuation of $14.00/share, so it's not selling at a bargain to NetNet; Using Graham's Valuation formula I get a value of -$8.80/share; I get a Free Cash Flow of about $.375/share which is not much for the price; and I get a Return on Capital Employed of about 1%, certainly nowhere close to its cost of Capital. Until I see some sign of improving return on capital and increasing free cash flow, I'll be a skeptic and stay on the sidelines. Regarding FRD... I like it, I bought it some time back at about $2.25/share. I get a NeNet value of $2.55/share; Free Cash Flow of about $.35/share; A Graham value of $3.41 using earnings and $5.09 using free cash flow. My analysis was only through the 10Q ended 9/30/01. I didn't have ROCE on my spreadsheet back then. I look for a move to at least $5.00 from these levels. Timba

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