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Strategies & Market Trends : Steve's Channelling Thread -- Ignore unavailable to you. Want to Upgrade?

To: Joan Osland Graffius who wrote (3796)	7/29/2000 9:52:52 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 30051

Joan, I do not think that their generators business is a large chunk of their total sales, but I do not know the details. They have now a "finance" group and while it is only about 10% of their profits, it puts on their balance sheet a big chunk of liabilities (like banks). The problem of course is that we are not yet in a recession and their write offs in that group increased by about 50%, if we go into a recession, that could be a double whamo, both contraction in their sales below their break even and losses in the financial group, and then the current PE will look very rich. By the way, they had negative cash flow in the last six months (partially because they borrowed to buy back shares). When you have a large debt to equity ratio, borrowing to buy back shares, is not wise. The charts looks "dead" right now at $35 or so, and I for one do not think they are particularly cheap (nor expensive, just not an exciting value). I would say that their current earnings of around $3/share are pretty close to their peak earnings, and if you compare CAT to GM (both cyclical), I would say that GM is a better value. Good luck Zeev