I'll start an exploratory position in CIT.
Some negatives are that it loans money in complex transactions, so it's accounting is difficult, so one has to trust management, and that has not been a good way to bet. CIT's debt/eq is HIGH, possibly too high.
OTOH, we know that CIT arose from a sale by desperate TYC. Knowledgeable (I hope) buyers, primarily institutions (I presume), were able to force a low price (again, I presume). Yahoo shows first trades about 21-22 (July 3). Today the stock's about 17.70. I note also insider buying at 21-23 by several officers and directors. The President bought about $900k at prices between $22.50-23.00. (But otoh, that's maybe peanuts to him because his pay is much more than EXTREMELY high.)
Analysts expect the company to earn about $3/sh. If so, the p/e is okay (imo) for the risks being assumed. CIT has had a good business history, bT (before Tyco). Media reports have said that CIT, once free of TYC, might be able to borrow its money at more favorable rates.
I'm hoping CIT will initiate dividends as it did pre TYC.
(Aside: I've owned CIT before. Mentioned it here (#10487) to no response. Got a double plus though when TYC bought it out for stock. Sad to say, I kept the TYC stock, watched it rise, watched it fall, bought more on its way down.)
From the WSJ, 10/19/00, "Tax-Loss Sellers Encounter Bargain Hunters Waving Cash":
"Martin Whitman... was putting some cash to work... He sounded like a kid in a candy shop. 'Little me, why did I think I'd be able to buy CIT Group below book value, but I did today,' he chortled."
Book value per Yahoo today is $21.30.
It'll be interesting to me to see who the institutional holders of this stock are when the quarter reports are issued.
Paul Senior |
