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Strategies & Market Trends : Free Cash Flow as Value Criterion -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (101)	11/2/1997 6:30:00 PM
From: Pancho Villa	Respond to of 253

I think it would be safe to say that most people hanging around this group pretty much speak the same language (i.e., understand each other despite small differences in valuation methods). I would like to deviate the tlak a bit to discussing individual stock. For instance looking for a short opportunity I actually discovered whatmay be a strong buy according to any criteria: SMOD. Any inputs? Pancho PS to the gentelman/lady who really likes MCD. I am long on it (a small fraction of my portfolio) but my bottom line analysis is that MCD is a hold (i.e., fairly priced as its current price, PE multiple rightly reflect growth rate that may be expected given the trouble they currently have in the US market and the uncertainties associated with developing markets)

To: Pancho Villa who wrote (101)	11/3/1997 7:49:00 AM
From: Reginald Middleton	Read Replies (1) \| Respond to of 253

Numvber 1 and 2 are on point. That is why you must run through the entire equation (not just the determination of appropriate value, but how it compares to the value in the market). As for funding stock buybacks with debt - debt is often the cheapest form of money due to federal tax laws. This being said, it is often wisest to pay for a capital intensive project (acquisition, stock buy back, etc.) with the cheapest money available. The problem is the price that the cheap money comes at - lack of payback flexibility which leads to cash flow volatility - which leads to a redcution in the overall corporate valuation.