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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (5208)10/30/1998 12:31:00 AM
From: jeffbas  Read Replies (2) of 78525
 
Some comments Paul.

All the homebuilders are doing poorly in the market, anticipating a poorer economic environment to come here. If it does not occur you will probably do well.

On TMO, I know a great deal about this "family", having followed it for 15+ years. You might want to read my (critical) posts on it on THI on Yahoo. I am much less enthusiastic now. The company's operating income performance, without gains from subsidiary stock sales and using something more reasonable than 40 years(!) to amortize huge amounts of good will would be much, much less impressive.

In my opinion, they were fabulous at financial engineering. But how could you lose if the price you paid for any acquisition did not really matter because the resulting good will was amortized over a period so long, and your financial engineering allowed you to raise capital very cheaply by selling high P/E stock. They were less good at running businesses as has recently become apparent with the financial gains disappearing and many subsidiaries taking charges to restructure operations.

I estimate that reported earnings would be about 25% lower if goodwill
were amortized over a period 1/3 as long as the 40 years used.

In sum I once thought this was a great company. I don't any more.
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