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Strategies & Market Trends : Range Bound & Undervalued Quality Stocks -- Ignore unavailable to you. Want to Upgrade?

To: BWAC who wrote (1683)	4/3/2000 12:49:00 PM
From: Neil H	Read Replies (1) \| Respond to of 5499

How about a PE of 3 VOLVY Friday March 31, 9:35 am Eastern Time worldlyinvestor.com Sector of the Day Volvo Stock Looks Like Cash on Wheels By William Diem, Auto Stocks Columnist Volvo is cash on wheels. Eighteen of them. Pretend you are a raider. Buy Volvo shares (Nasdaq:VOLVY - news). It's like buying cash with a future. The heavy-truck company based in Sweden is a target of Fiat (NYSE ADR:FIA), a buyer of Renault, cash-rich and generally an exciting play right now. The massive consolidation in the auto industry during March buried what would ordinarily have been a big story. Volkswagen (OTC:VLKAY - news) got its long-dreamed of truck division by buying $1.6 billion in shares of Scania (NYSE:SCV/A) from Investor AB, the Swedish holding company. Nordic Market Track This happened just a few days after the European Union ruled that Volvo could not buy investor's shares and consolidate the two Swedish truckers into one. The EU said the combination would have too much power in the Nordic markets (90% share) and one or two other countries. It was a stupid decision, because the market for heavy trucks isn't national -- it's continental. So be it. The idea wasn't that great anyway. Volvo and Scania, both strong in North Europe, would have lost sales because Nordic customers would not put up with a near monopoly. Inside the company, Scania is happy. Volkswagen and Investor together have 49% of the voting shares and 27% of the capital, enough to control the company. ``Volkswagen is a real good partner, because it's no problem with the competition authoriites,' said Eric Kjellgren, an analyst with Nordbanken in Stockholm. ``Volkswagen is interested and ready to put some money in it. Scania will have the possibility of expanding their business.' Meanwhile, Volvo, in its aborted attempt to buy Scania, accumulated 45.5% of the capital shares and 31% of the voting shares, which it still owns. However, because of the European Union ruling, it can't manage those shares and throw its weight around on the board. How Much Would You Pay for Cash? Volvo has a problem. Ever since a year ago when the company sold its car division to Ford, Volvo has been cash rich. If Volvo sold its Scania holding for the same price that Volkswagen paid, Volvo would have about 65 billion crowns in cash, and its market capitalization is only 90 billion. Thus, 72% of the company is cash or Scania stock. For $27 -- the recent ADR price on the NYSE, up from about $23 early in March -- you get $19.50 in cash and a truck company earning about $8 a share. If I'm thinking correctly, you recoup your investment the minute you make it, more or less. Once I went to a farm auction in Ohio where the bidding was slow -- really slow. Finally, the auctioneer took a $50 bill out of his pocket and auctioned it off. It took a while for him to get it up to $49, but it did get people into the idea. Meanwhile, Volvo doesn't want raiders to come along and take its gold and sell off the rest, so they want to get rid of the cash. Volvo is in talks with Renault VI, which would probably be willing to merge, but doesn't really want to sell. But Renault has Mack trucks, which Volvo covets. The Swedish financial daily Dagens Industri last week quoted a Volvo source as saying a Renault deal could come within the next few weeks. And Volvo is probably talking to everything else that rolls on 18 wheels, including MAN in Germany and Navistar in America. And meanwhile, it has always been Fiat's dream to merge Volvo's truck business into its own IVECO. When Ford bought Volvo cars in 1999, Fiat was negotiating to buy the whole company. Nordbanken, analyst Kjellgren's bank, has a ``buy' rating on both Scania and Volvo shares. Scania might grow bigger, but a Volvo investment will be more fun as the future reveals itself. Regards Neil