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

To: Michael Burry who wrote (10113)	3/3/2000 6:48:00 PM
From: Freedom Fighter	Respond to of 78748

Mike, I'm not too familiar with any of those businesses. I noticed the Aetna deal and I'm hoping that there's a little action like that in the property casualty and food groups. I believe there's value in both sectors. Maybe I'll take a look at health care. I own a little SLE (average price about 17) and some IBC. I think I may have blown it on IBC. I bought it in the low 20s so I am getting killed. I do think it is extremely cheap right now but I think I overestimated the value initially. Here's the lesson I learned. I've always discounted free cash flow defined as follows: Net Income + Depreciation + Amortization - Capital Spending - Some Increase in Working Capital Before IBC I never really looked at an industry where virtually all the growth comes from acquisitions. Companies in the food group (especially IBC) often get most of their growth that way. So I was discounting the growth but not subtracting the cost of purchasing new businesses. I am not sure how to resolve all the issues related to buyouts and mergers as it pertains to free cash. Sometimes they are for part stock and part cash. Sometimes they are financed with all debt. I am only certain that without the acquisitions there is almost no growth for IBC and there are real costs associated with them that lowers free cash. Maybe I was the last value guy to realize this, but if not I think others should take a closer look it - especially in consolidating industries. An acquisition is some form of capital spending. You are just buying the plant and equipment instead of building it. Wayne