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Strategies & Market Trends : Value Investing

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To: James Clarke who wrote (9275)	12/12/1999 1:48:00 AM
From: jeffbas	Read Replies (2) of 78560

Nicely put on CNH, Jim. It is one of the dumbest things I have ever seen done. Prudent mgmt NEVER loads up a cyclical company with debt. I had forgotten about the $2 billion new equity overhang. In a sense, the lower the stock goes, the lower it goes. The lower the share price, either the less the chance of an equity offering (which leaves the company buried in interest charges that operating income can't cover) or the more the dilution of existing holders if they do one anyway (a bottomless convertible effect). By the way, THIS is my idea of a near ideal short, not these overvalued Internet stocks. It could have been shorted at $16 less than a month ago. The fundamentals are known to everyone and were ruined by this merger for a long time to come. They can't make money on the current debt load, and there is a huge equity overhang protecting you against a big rise. A short at 16 would have had a quantifiable and attractive risk/reward, whereas I maintain that that is just guesswork on RHAT type of stocks.

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