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

To: Spekulatius who wrote (23272)	2/3/2006 7:47:55 PM
From: dstange	Respond to of 78704

TYC = I have never been a big fan of Tyco because each of their units operates in competitive markets without many barriers to entry. Yet the price/value appears compelling. Here is the latest analyst conclusion from Morningstar: "That said, we think the current mid-$20s stock price represents an extremely compelling value. Aside from the underinvestment in health care, we think a majority of the issues plaguing the company are fixable within the next few quarters, putting the company back on track toward a 3%-4% growth rate and midteens operating margins. And with $40 billion in sales, the enterprise is fully capable of generating somewhere between $4 and $5 billion in free cash flow annually. In fiscal 2004 it generated $4.4 billion (excluding unsustainable working capital benefits), and in 2005 it threw off $4.6 billion. This year, we estimate the number to be about $4.2 billion. If we capitalize the average of $4.4 billion at 9% (a formula to derive the value of a constant stream of cash), the resulting valuation is $49 billion, or almost $25 per share. That means at current prices, the market either doesn't believe the cash generating power is legitimate, or that it won't grow. We think both assumptions are misguided. The company is solidly profitable, and even with its current problems, Tyco grew 4.2% last quarter, 3% last year, and 5% in 2004. To give into such extreme pessimism at these prices would be a mistake, in our opinion."

To: Spekulatius who wrote (23272)	8/2/2006 11:47:17 PM
From: Spekulatius	Read Replies (2) \| Respond to of 78704

TYC - reduced my position in TYC today ahead of earnings. I have initially increased my position in TYC to take advantage of the breakup in 2007. Now after watching VIA and looking at CD from the sidelines, i don't think there will be much short term profit in TYC breakup. I still have a position and will look at TYC fragments after the breakup as well. For now it's not an overweight position any more and I intend to use the proceeds to deploy what i think will be better opportunities.