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: jeffbas who wrote (3169)	2/7/1998 6:24:00 PM
From: Michael Burry	Read Replies (1) \| Respond to of 78594

Jeffrey, Re: BMC Let's see: 1) The buyback in January took place entirely in one week - the price has been pretty stable both before and after that. It may be supporting the bid now, I suppose. 2) They've been taking on LT debt at favorable rates (Eurodollar or LIBOR + ~0.5%) to finance some of 1997's capital expense as well as (likely) the 1998 buyback. 1995-1996 capital improvements were out of cash flow. I guess we can be wary of "cap improvements have hurt us this year, but don't worry" but then that's why the insider buying to me was significant - most of it the very next day after the fall. Investments like the Hungarian plant will lower costs in the future. But there are also investments in current technologies and capacity that will allow the company to supply future high definition markets of many types without interupption. 3) I don't mind borrowing at today's interest rates to buy back shares. More companies should be doing it. In BMC's case, its earned ROE of 20%, 28%, 26%, 20%, 21%, 20%, 30% going back seven years, which indicates to me its strong market positions in both masks and lenses, good business economics and solid management. It has ~20% of the market for these masks, and is the sole supplier to non-Japanese visual display businesses. 4) If we take the management by its words and actions, we would expect 1998's second half will see lower costs/increased unit sales and 15% earnings growth "at least" over 1997 as the capital expense tapers off. The Asian problem will result in the sale of more imported Asian TV's and monitors, so it's not a quick rebound. All 5 analysts following it already hacked estimates (four of the five set a low bar of less than 17 cents for this quarter) and 3 of them downgraded the company. The stock was 80+% held by institutions so I expect a long dormant period. The stock isn't moving like it's got momentum players in it anymore. Much like the car industry, the economics can sometimes be so much better for the supplier than for the buyer. After all, how much really extensive advertising does BMC have to do? Its margins can be much better than Zeniths, as can its ROE. 10? Anything's possible. The Asian crisis lasting a long time or even worsening. The economy contracting. The company appears very cheap relative to its peers with insider buying and a logical way out of its current disdained position, however. Good Investing, Mike