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

To: Investor2 who wrote (16136)	1/10/2003 10:33:40 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78594

Hi I2! I see how RPM's been hit with the asbestos problem today. Ouch! I've been attempting to avoid investing in any company with asbestos problems. I repeat as a mantra the opinion of Jim Clarke here: "There are no small asbestos problems" I count at least two errors of omission for me with this tactic: Both Haliburton and Sealed Air recovered from their sudden downdrafts. So at some point down at lows, they were buys -- in hindsight anyway. Sealed Air stockholders suffered for a while, but suddenly the stock doubled when SEE announced a legal settlement. I have at least one positive experience: I sold COO about a year ago after somebody here brought its asbestos problems to my attention. That stock later did suddenly drop (on asbestos worries), but I see now it has recovered to near my sell point. That so many companies are involved in asbestos litigation makes it hard for me to totally avoid being exposed to these stocks, given how I like to diversify. So I have possible errors of commission as a result: I have long-term, but very small positions in HON, ABL, DRRA, NSI which appear inexpensive to me. With companies such as these, I'm not willing to close the position at current (low) price. OTOH, because of the asbestos issues, I'm also very reluctant add to the position. Paul Senior

To: Investor2 who wrote (16136)	1/11/2003 5:49:17 PM
From: Bob Rudd	Read Replies (2) \| Respond to of 78594

I2 - RPM: The great revelation here is not soaring asbestos claims like we've seen elsewhere. Quite the contrary - current trends in claims are down. The revelation was that insurance assets are likely used up in calendar 2004 so the 30mm run rate would be 100% picked up by RPM rather than 3mm which is current cost based on 90/10 sharing provision with insurers. Three scenarios drop out of this: continuing 30mm run rate in costs; legislative relief coming out of hearings scheduled for Feb [Republican admin + congress + outrageous plaintiff's bar actions getting settlements for people with no symptoms + at least 1400 companies with signficant exposure makes action more likely in 03 than any time in recent memory]; or trends become more negative as no relief is forthcoming and the plaintiffs bar focuses on the dwindling pool of solvent targets. I ran the numbers based on current run and tax rates, assigning .5, .3 & .2 probabilities and come up with expected EPS of 1.12 when insurance assets are gone - not exactly the end of the world: (113.52-30).65/115=1.11 Current run rate (113.52-10).65/115=1.23 Reduced by legislative relief (113.52-50).65/115=1.00 Increased by unchecked litigation 1.11.5+1.23.3+1*.2=1.124 [Note that I didn't factor the 3mm of the 30mm that is already in their EBT run rate - so the 30mm is 10% high for conservatism] I reduced my position by ~40% in October over concerns that insider selling might be a harbinger of not such good news. Now that the cats out of the bag, I'm gonna watch it closely.

To: Investor2 who wrote (16136)	1/20/2003 3:56:01 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78594

I2, revisiting RPM again. What is your opinion on the asbestos issue as regards RPM? I'm still considering my response to you. If we have HAL, SEE, and now HON settling, and lawmakers will be meeting soon to discuss possible limits to lawsuits, maybe we'll be seeing more settlements being announced and more pressure for settlements to be made. If I recall correctly, we discussed RPM as a buy around 8 (it's now around 11); I passed then, but now my interest is piqued again. Their stable brands and steady dividend are attractive. Weren't there lawsuits being filed against RPM for defective house siding or something at that time? Is that behind them, and what's your current opinion on RPM as a buy at current price? In the larger sense, IF asbestos issues are finally being resolved, maybe it's time to prepare a list of stocks that might benefit from settlements or caps on liability. Paul Senior