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

To: Paul Senior who wrote (54056)	6/17/2014 7:44:44 PM
From: Spekulatius	1 Recommendation Recommended By Jurgis Bekepuris Read Replies (1) \| Respond to of 78701

Re CBI - I don't think that you understand the claim if the author. There is no piggy bank - the author claims that CBI creates goodwill (coming from the Shaw purchase) almost every quarter as an asset and then book this phantom gain as earnings. When I looked at CBI balance sheet, i in fact noticed that CBI goodwill has increased significantly after the Shaw acquisition, which is consistent with the authors claim. Also, looking at CBI cash flow statement, it looks like free cash flows are nonexistent or even negative most quarters, Of course this can in fact occur, because accrual accounting is used with the large projects that CBI is working on, but it still is not very comforting. Since the valuation is not attractive, even if CBI accounting were kosher, I'll leave it at that, but I think it's a better candidate to buy puts for, than going long.

To: Paul Senior who wrote (54056)	6/17/2014 8:00:26 PM
From: Asymmetric	Read Replies (1) \| Respond to of 78701

Paul, thanks for your response. Of course, I got a fill on my limit order at 72.25 before I knew there was a major negative report out. From the report, a lot of the stuff hammering CBI from the Shaw acquisition appears to stem from the two nuclear projects Shaw was building in the southeast - one in Georgia and one in South Carolina. The Prescience report seems to imply that the contracts Shaw signed to build these nuclear plants had major fixed cost elements, and that CBI is using accounting trickery to now hide having to recognize the construction cost over runs, the delays, and some major rework that had to be redone. Given the past history of nuclear plant construction in this country, if Shaw was dumb enough to sign fixed cost contracts and then CBI (and their financial advisers) was dumb enough to not recognize these contracts as a major risk issue in their vetting process, then that would call into question the competence of their senior management to me, and their whole decision making process. I've liked CBI in the past because they've literally been a very competent nuts and bolts type of company in the engineering and construction sector and have been solidly profitable over the years, as you pointed out. They've shown they know how to get stuff engineered and constructed, and how to bid on projects so as to make a very decent profit The options on CBI went totally bonkers today. I'm guessing we go down some more from here.