D. Nadworny: Adding to my exploratory position in GT today.
stocksheet.com
I see it this way: While there's some good stuff in the balance sheet history (such as price below book value, and low price to sales), overall I (and I'm no expert) call it poor (or worse) because there's no growth in revenue and yet to get where they are now, they had to double debt.
There's a good dividend yield. But it's pretty high (relatively) which "could", "maybe", "perhaps" signal that it's unsustainable. If the dividend were to be cut, imo it's possible that GT could sell for the p/e's that auto parts suppliers are going for (say maybe 4). That would mean, I'd guess, that the price of GT could be halved.
I'm buying GT because they are the dominant tire manufacturer, they likely will find a way to stay in business, the stock is at a nine year low and not much has changed in the nine years. That is, competition is still tough, radials last a long time, there's not much money to be made in oem sales. Still, GT perseveres.
-------
This stock would normally, have a low pride/shame ratio. As in: "Tire company? How the heck can anyone make money in a tire company? You buy Goodyear, you got dead money. Buy Sun Micro. It's dropped and it'll come back."
However, the Firestone debacle upgrades the pride/shame ratio, as in "Hmm. Yes, I can see that. GT gets the business that Firestone loses." (Aside: analysts have lowered their outlook for GT because, in spite of the Firestone issue, the weak Euro and other factors are stronger influences.) I also point out, that I notice in Yahoo that both Templeton Growth and Bernstein (Sanford) are holders. My first reaction is: "Sheesh. You gotta be kidding. I can't believe guys like this would by this junk." (I can dance around the both sides of the pride/shame ratio apparently -g- and at the same time -g-). After reflecting a bit, I conclude though if it was value stock enough for them, I'm glad to be holding too. Pride/shame ratio increases. --And as I looked back to check some spelling I see now that Brandes and Franklin Resources have positions as well. If I'm correct that all these guys are value players, then imo, now would be a decent time for value investors here to consider having GT in their portfolio.
Paul Senior
who's been wrong many, many times |
