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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (7993)	8/11/1999 3:04:00 AM
From: James Clarke	Read Replies (2) \| Respond to of 78817

I would buy MCK at 31, and I would certainly buy it after the drop today. WMI I am much more cautious about. If you look back at the MCK story, the McKesson side is clean - you can value it based on historical financials. Don't assume it was fairly valued before the HBOC acquisition - I think it was way overvalued then. But even if you believe that, it is not hard to crunch the numbers and understand that you are not paying much, if anything, for HBOC. It is probably not worth anything close to the $14 billion MCK paid for it, but its worth something substantial. I see a $50 price target when things calm down. It might take two years, but the value is there. The difference between MCK and WMI is the balance sheet. MCK is not going to go "poof". Despite a foolish acquisition, they have very little debt. If you're looking at WMI, before you buy into Wall Street's "huge cash flow" story, I would suggest you really dig into the last three years financials and look for the cash. I mean free cash flow. I couldn't find much after all the accounting garbage. Maybe this is the bottom - I did my analysis after the first drop and said no way. And I am not willing to fish for bottoms on WMI until I am convinced that Wall Street analysts have read the financial statements, or until it is a compelling valuation. But considering the state of the balance sheet, I didn't see anything close to a margin of safety. I would be very interested in Mike's take on MCK. That's much more within his circle of competence than mine. JJC