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

To: James Clarke who wrote (14304)	4/11/2002 11:35:23 AM
From: TimbaBear	Respond to of 78731

Hi James Regarding AOL... I looked at it the other day and just can't justify a purchase anywhere around the current prices. I get a NetNet valuation of $14.00/share, so it's not selling at a bargain to NetNet; Using Graham's Valuation formula I get a value of -$8.80/share; I get a Free Cash Flow of about $.375/share which is not much for the price; and I get a Return on Capital Employed of about 1%, certainly nowhere close to its cost of Capital. Until I see some sign of improving return on capital and increasing free cash flow, I'll be a skeptic and stay on the sidelines. Regarding FRD... I like it, I bought it some time back at about $2.25/share. I get a NeNet value of $2.55/share; Free Cash Flow of about $.35/share; A Graham value of $3.41 using earnings and $5.09 using free cash flow. My analysis was only through the 10Q ended 9/30/01. I didn't have ROCE on my spreadsheet back then. I look for a move to at least $5.00 from these levels. Timba

To: James Clarke who wrote (14304)	4/11/2002 11:38:43 AM
From: S. maltophilia	Respond to of 78731

I've had FRD in my kennel of possible future buys for some time now, but have never done thorough DD on it as yet. But do you have any thoughts on the price of the steel coils they buy? They have historically relied on both domestic and foreign suppliers; with the recent tariff changes it seems that they're at the mercy of NUE & LSS. I stop looking at AOL as soon as I see the goodwill number. Works every time.<g>

To: James Clarke who wrote (14304)	4/11/2002 5:22:27 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78731

Jim Clarke, re: AOL. I looked to see if I can show why this stock might be of interest to a conservative value investor here. I can't find really good reasons. Stock's p/sales might/might not be reasonable; stock is possibly near book value (after the $50B write-off); breakup value might be about $30 sh. (with many assumptions, per previous posts here). Company and stock are very unpopular now. However, looking 3-5 years out, there are all those great business names and franchises that AOL has. In the past, it seems to me, Americans have considered their entertainment as a priority and have been willing to pay for that. I'm saying that AOL ought to have pricing power in some of its markets. Which is more than most companies have. At some point again, imo, people will again want to pay up for this conglomerate. jmo, Paul Senior (I added more today.)