Believe me, if I knew what a roller coaster ride I was setting myself up for
when I made my initial investment in CBI, I would have just watched from
the sidelines.
I'm getting too old for this kind of excitement.
My original thesis for investing in CBI over a Fluor, or Jacobs Engineering,
was that it's acquisition of Shaw was supposed to be 'synergistic'. By taking
over a poorly run company, with shoddy bidding processes that resulted in
poor operating and profit margins, CBI could transform Shaw into a new profit
center, and gain expertise in an area - mainly nuclear - that it had little to no
presence in.
While I understood (or thought I did) that I was taking on additional risk due
to the financial leverage utilized, I thought once CBI put their management
and financial processes in place replacing Shaw's, that this risk would be
adequately compensated within a reasonable time period.
I didn't envision, nor apparently did CBI management, the black hole the
Vogle plants had become.
From a safety perspective, I'd agree that Fluor's $2 billion in cash is much
superior to CBI's $347 million position given they are similar sized, and CBI
has twice the debt $2 billion vs Fluor's $1 billion. And CBI is still negative
cash flow, to Fluor's positive cash flow.
However - CBI has stated they will turn cash flow positive in the second half
of this year, and would likely begin buying back stock - which I suppose
is parlance for a company signaling they think their stock is undervalued
and/or destined for better tomorrows.
Also CBI sells for a trailing PE of 10, and Fluor sells for a PE of 17.
CBI also has a 80% higher profit margin, CBI is 4.46%, vs FLR of 2.44%
Lastly of note, David Einhorn of Greenlight Capital has doubled his position in CBI.
Fluor appears much the safer play, but CBI appears to have in place finally
the ingredients for better prospects for stock appreciation going forward.
The bad news, at least as it relates to Shaw, I hope is finally all out. |
