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

To: Jurgis Bekepuris who wrote (32156)	9/25/2008 7:21:41 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78462

UTX. Why now? Because stock is trading at at about a 2 1/2 year low, and it's time to buy: it's become a value stock from whatever it was before -- growth/garp. (This of course, jmo.) Profit margins are at 7-8%, and they've been around that level for several years. Consistent. What relationship, if any, does "profit margins" and/or "operating margins" have to the price someone is willing to pay for the stock? Other than to say, for example, yeah high profit margins likely mean people are/should-be willing to pay more for the company, and if the company has low profit margins (excluding high sales/sh companies like grocers) we will intuitively value it less. I have a formula that I use. UTX falls within it as a buy. (Of course in this market, many companies, maybe too many, qualify. -g-) P/e of this company 11-13 is lower now than any average number of the past ten years. High goodwill perhaps, but stated book value has increased every year in at least the past ten, and p/stated bk (2.6) is now lower than the average of any year in past ten (lowest year was 3.3). Dividend seems to increase every year. Considering two statements: 1) "high goodwill resulting in almost zero net tangible assets. High debt compared to tangible assets.." , which is followed by 2) "There are much better companies". If there's an implied "so therefore" between 1) & 2), what megacap companies do you see that appear to offer better opportunities? My opinion is that with UTX we're dealing with a consistently profitable, huge, diversified, over 200,000 employee company at an attractive p/e. Jmo of course, but I don't see "zero net tangible assets" and/or "high debt/tangible assets" is a significant cause for worry or even very relevant at this time in trying to value the company stock or to measure success of this company going forward. Perhaps I am wrong. I intend though to continue to add to my few shares if/as stock drops and there's no adverse news forthcoming. utc.com gurufocus.com