Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Spekulatius who wrote (55351)	5/25/2015 12:02:01 PM
From: Asymmetric	1 Recommendation Recommended By Mattyice Read Replies (1) \| Respond to of 78714

Believe me, if I knew what a roller coaster ride I was setting myself up for when I made my initial investment in CBI, I would have just watched from the sidelines. I'm getting too old for this kind of excitement. My original thesis for investing in CBI over a Fluor, or Jacobs Engineering, was that it's acquisition of Shaw was supposed to be 'synergistic'. By taking over a poorly run company, with shoddy bidding processes that resulted in poor operating and profit margins, CBI could transform Shaw into a new profit center, and gain expertise in an area - mainly nuclear - that it had little to no presence in. While I understood (or thought I did) that I was taking on additional risk due to the financial leverage utilized, I thought once CBI put their management and financial processes in place replacing Shaw's, that this risk would be adequately compensated within a reasonable time period. I didn't envision, nor apparently did CBI management, the black hole the Vogle plants had become. From a safety perspective, I'd agree that Fluor's $2 billion in cash is much superior to CBI's $347 million position given they are similar sized, and CBI has twice the debt $2 billion vs Fluor's $1 billion. And CBI is still negative cash flow, to Fluor's positive cash flow. However - CBI has stated they will turn cash flow positive in the second half of this year, and would likely begin buying back stock - which I suppose is parlance for a company signaling they think their stock is undervalued and/or destined for better tomorrows. Also CBI sells for a trailing PE of 10, and Fluor sells for a PE of 17. CBI also has a 80% higher profit margin, CBI is 4.46%, vs FLR of 2.44% Lastly of note, David Einhorn of Greenlight Capital has doubled his position in CBI. Fluor appears much the safer play, but CBI appears to have in place finally the ingredients for better prospects for stock appreciation going forward. The bad news, at least as it relates to Shaw, I hope is finally all out.