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Non-Tech : Tyco International Limited (TYC) -- Ignore unavailable to you. Want to Upgrade?

To: John Carragher who wrote (3435)	6/22/2002 9:52:38 AM
From: John Carragher	Read Replies (1) \| Respond to of 3770

John Neff arron's: In January you had no trouble finding lots of good companies at inexpensive prices. Is that still true? Neff: Yes. One is the homebuilder D.R. Horton. Another is Washington Mutual. A third is a switch for me, but at a price I'll tackle almost anything. It's Tyco. Q: At what price did you tackle Tyco? Or did Tyco tackle you? A: My cost is $20.80, which isn't great. [The stock now trades for about $15.] About 80% of Tyco's sales and earnings come from three good areas -- health care, technology and safety and security. I know from yesteryear the operating companies that Tyco bought. They bought everything in sight. Q: No doubt, from you. A: Right, and they paid through the nose. The media is beating them up for buying CIT Financial for $10 billion and trying to sell it for $5 billion. But the stock they paid for it is now worth $3 billion. The new-issues market will warm up and Tyco will be able to take CIT public again. If not, they will sell it to somebody. It is a decent leveraged finance company, with collateral for almost all its loans. Once you remove CIT, Tyco becomes an average industrial company, two-thirds equity and one-third debt. Companies in Tyco's lines of business usually sell for 20 times earnings. I've got the company earning $2.60 a share this year, and it generates about $2.5 billion in free cash flow. This is hardly a basket case. Next year it should earn $3 a share. Maybe it will sell for 10-12 times earnings, which would mean a price of $30-$36. That's pretty good alongside my $20.80, much less the current price. Q: Alas, the market doesn't share your upbeat view, especially since the indictment of Tyco's former CEO, L. Dennis Kozlowski. A: If he has done something wrong, why, they should get rid of him. But these things become real political footballs, and they just slay the stock. Then you raise a whole new constituency of shareholders.