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

To: Paul Senior who wrote (12645)	6/13/2001 2:02:15 PM
From: TimbaBear	Respond to of 78550

Paul... KAB...."earnings" is why I have moved to the Statement of Cash Flows. Although reported "earnings" were about 14 cents, the Cash From Operations(CFO) was $1.86/share. The Change in cash when adjusted for non-operational, discretionary uses of cash in the Financing and Investment areas gives me a Free Cash Flow of $1.69/share. This is what I use instead of "earnings". For me, it is the money that can be taken off the table without harming the business model that I want to use to determine if the price for that cash flow offers any margin of safety. In order to earn $1.69 safely, I would have to have $37.55 invested in a CD at 4.5% today or, using my 6% figure from before, I would have to have $28.16 invested. A CD offers me no potential for appreciation of the asset other than the interest paid. I look at the price of the stock of KAB at $6.80/share and say that it is earning over 4 times the CD rate (28.16/6.80), so no matter how it re-allocates its assets through spin-offs, the underlying fundamentals offer a margin of safety (for me), with an interesting possibility for appreciation. Timba