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

To: Michael Burry who wrote (4542)	7/31/1998 12:27:00 AM
From: James Clarke	Read Replies (2) \| Respond to of 78704

<<and if NH is turning in its current numbers during such a downturn, you gotta imagine that when times are booming, NH will rock>> Mike, I agree that New Holland is a great long term investment at this price, but this is certainly not a business in a downturn. Times are booming now, and have been for the last three or four years. Earnings are closer to a peak than a trough, and the fear in the sector is that the peak is right now. Agco fell to 5 times earnings today. FIVE times! What you need to think about with New Holland is the level of free cash flow and the balance sheet. You know this business will make it through the trough, and is likely to stay profitable. Also, New Holland's next peak of earnings (if this is indeed the peak) will be higher than this one - this is a cyclical grower. As Mike said, any growth is just gravy. You're not even paying full value for the company's mid-cycle earnings power at this price. I figure it this way. They're earning $2.50 now, and this company will earn money in a trough. Figure 50 cents to be conservative. Average the two and you get a buck fifty of "mid cycle earnings". If you can buy a cyclical at 12 times mid cycle earnings, that's not investment. That's theft. But you may have to wait through a three year cycle to cash in.

To: Michael Burry who wrote (4542)	8/2/1998 9:41:00 PM
From: valueminded	Respond to of 78704

Mike Agree about some of the information but since the stocks are in a downtrend - presumably predicting a southern turn for the business, I would (and am) waiting to add any. My target is to triple my position when NH is in the 10-12 range. At the rate it is going, it should be their pretty soon. At that range, the dividend will start to kick in as a sort of security net. Since this company doesnt (cant) buy back shares, the only choice it has to increase stockholder value is to raise the dividend, short of that, wait for the stock price drop to yield an attractive dividend