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

To: jeffbas who wrote (9699)	1/21/2000 12:45:00 AM
From: James Clarke	Read Replies (3) \| Respond to of 78717

Cyclicals - look to buy Caterpillar tomorrow below 45 if they scare investors on the conference call. For those not scared of cyclicals, I would point out that Trinity Industries (TRN) is one of my favorite companies (they're not the greatest company in the world, but I just like them. Their executives are very good businessmen and nice people). Railcars and barges mainly, along with a couple of other smaller but pretty good businesses. The railcar backlog is what the stock trades on, and that backlog is definitely falling. Orders are soft, and probably getting softer. But the "backlog falling" story is of the "no duh" variety. I don't think there is much downside here. The company is by far the low cost producer in the industry - they will be the last ones making money if things really get bad. The stock is trading at book value, and at about 7 times earnings. They have a near perfect balance sheet and free cash flow of about 11 or 12% of the share price. What people are scared of is that earnings are likely to decline, and don't kid yourself - they WILL decline. By how much is the question - they're earning about $4 now and the stock trades at 25. The company bought back 10% of its shares in the last year. There is absolutely no reason other than valuation for the stock to go up, which is why nobody is buying it. Cyclical with declining earnings and no near term catalyst - there is no price too low with today's "one day P&L" mindset even among those who call themselves value investors. There are very good reasons not to buy TRN if you have a 6 month time horizon, but I think its something to take a good look at for a longer term portfolio at around 25. If you want to make a real bet on the railcar industry, Greenbriar's (GBX) railcar business is almost free. With this one you've got to dig into the balance sheet. Backing out the cash is easy. Then look at the leasing business. I would back that out too, leaving the railcar business trading for virtually nothing. I was listening to a conversation among some friends at the office today. Bandwidth this, network that. I just said, "I've got to listen to my railcar conference call" and they laughed at me. That gives me comfort in being short the Nasdaq and long TRN. Yeah, I can spend 5 billion dollars laying a network of cable around the world, not knowing whether or not somebody else is going to have a better mousetrap in six months, or I could buy the low cost producer in a depressed industry. For the first I pay 17 times book, for the second I pay book. That's not among life's tough decisions in my opinion. On another note, then I'll stop, any thoughts on Equifax (EFX)? I'm just starting to do my homework, but a few things look good. Free cash flow is enormous, and the company grows. They seem to have done some poor acquisitions and growth in one of their core businesses has slowed to a halt. I know zippo about the industry, and I wonder if there is somebody here who can help me out.