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

To: Paul Senior who wrote (11958)	1/28/2001 9:24:03 AM
From: Freedom Fighter	Respond to of 78826

Paul, I've come to around to the view that the best way to think about how to value businesses is to think like an owner. The different methodologies (P/S, PEs, P/BV, P/CF etc..) that are applied by the marketplace to different businesses usually make a lot of sense because of the specific qualities of the businesses. Some are cyclical - so earnings in any snapshot of time can be meaningless. Some have profits that change with interest rates. In some cases the depreciation rates don't match economic reality - so earnings are actually higher than reported. I agree that that can complicate the screening process. My own screening process is pretty simple. I buy both versions of Value Line. Each week I scan them for companies I would like to own based on their long term record, balance sheet, return on capital, prospects, other basic information. I put them all in Yahoo portfolios broken down by industry and then I casually glance at the charts and news daily. In the mean time I do more serious research on any of them that are close to a price at which I would like to buy them. I also add companies to the list that I read about in magazines, learn about from other investors like yourself, pick up from Outstanding Investor Digest that other top value guys are buying etc.. Because of my initial screening criteria, I think my process leaves out a lot of potential investments in industries and individual companies that are very depressed. But it gives me a list that quite frankly is a lot larger than I will ever understand fully or can track completely without giving 100% of my time to investing. I try to lead a very balanced life so anything over 98% is too much :-) Wayne

To: Paul Senior who wrote (11958)	1/28/2001 4:14:49 PM
From: Tomato	Read Replies (1) \| Respond to of 78826

I wonder if someone is interested in helping me out on how to value the stock of KDUS and also tell me what action a rational BOD would be doing now to enhance share value? Here are the facts as I know them to be. KDUS: 1. 13.1 shares O/S 2. Carl Icahn owns 25% 3. Approx $24 mil in cash 4. a 20-30% (not sure exactly) interest in Axiom, a private biotech. Not aware of how much it's worth, but figure a min. of 20 cents per KDUS share. 5. No employees, so the burn rate, if there is one after assuming a 5-6% return on the $24 mil in cash would consist of the salaires of the CEO, who is the only employee, and the BOD and whatever the cost is to produce the SEC required documents (maybe there are more expenses, but I'm not sure what) 6. (Here's the tricky part) There's a good possibility/probability that KDUS will be receiving patent royalties beginning in 2004 or 2005 of perhaps $12 mil yr. or more--lets say $13.1 mil per year to make the arithmetic easy. I don't know how long the royalties continue for - but assume it's the length of the patent--I also don't know how long a drug patent in good for? Anyone know that? 7 years or so? So with that, how do you figure the present value? It's got to be at least $2/sh just figuring the cash and Axiom shares...but how do you do the math and what discount rate do you use for the stream of royalties? If you expect $1/sh in 4 years, would that $1/sh convert to 60 cents now? The $1/sh in 5 years to 50 cents now? Do you just add the 7 or whatever it is years' worth of royalties up properly discounted and add those to the $2/sh cash for the right answer? Then to the final part of the question-- if you're the BOD, do you try to sell the company now or is it best for SH to just sit tight and wait for the royalties to begin? And then, do you pass them on as dividends, or do something else? Thanks to anyone interested in tackling this. BTW, I own some of this stock if you're wondering.

To: Paul Senior who wrote (11958)	1/28/2001 6:11:11 PM
From: Q.	Respond to of 78826

re. EV/EBITDA, I think it's most valuable for comparing to foreign companies that don't use US-GAAP accounting, especially for evaluating them as takeover candidates. I think that this discussion began when I posted a table of EV/EBITDA for automakers that appeared in a Barron's article on BMW, which was discussed as a possible acquisition for various larger automakers. BTW, automakers are so highly leveraged that the stock price has little effect on EV. If you're a big company interested in taking over a little one, EV (not market cap) is obviously what you want to look at in the prospective acquisition. I'm not sure it's as helpful for stock investors, though, especially for evaluating a cyclical stock and a highly leveraged company. The massive debt appearing in the EV will wash out the effect of the stock valuation.

To: Paul Senior who wrote (11958)	1/29/2001 11:10:01 AM
From: Jurgis Bekepuris	Respond to of 78826

A story of uninformed investor... My worst last year's investment (not counting some option plays ;-) ) was GES, which I bought at 7.X in November and sold at 4.X couple days later after negative earnings report. Of course, I could have held it from there or even added more, but I decided to let it go because of the high leverage. I should not have bought it in the first place for that reason, but greed rules eternal... So it climbed to 7.X and then today's news hit: www2.marketwatch.com Maybe the company is a good investment at this point, but the "violation of its loan covenants" is not something uninformed investor can deal with. Good luck Jurgis - Almost all tech right now. Lightened on SYMC @ $50. Holding the rest. Still looking to add LDP.