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

To: Bob Rudd who wrote (4614)	8/6/1998 12:45:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 78666

re: "Worry about Agco" I wasn't necessarily referring to the credit portfolio. Just considering the source, I thought the statement stands on its own. Another tidbit about Agco. I visited a Case dealer a couple months ago, and he had a map on his wall of all his competitors within 200 miles or so. Green pins in the map for Deere, Blue for New Holland and Red for the Case dealers. I asked him, "What about Agco?", and he said they're not even relevent to his business. As an institutional holder of Agco, that should have terrified me. If I had ran to the nearest pay phone and called in a frantic sell order we would have gotten $19 for our shares. But I didn't and we sold them at a price much lower than that, but now at $11 Agco deserves at least a look. Recognize that the balance sheet is a disaster, but the 10-Q should be a must read for a value investor when it is released. Should be any day now. I'm not saying its a buy - your first task is to assess bankruptcy risk. Don't even think about the P/E multiple until you are comfortable with the balance sheet. Because if we do go into an agriculture downturn and somebody goes "poof" that will be Agco. Be extremely careful when you buy cyclicals at high earnings just because the P/E multiple looks cheap. Even when it looks extremely cheap. (Case traded at 9 times earnings a month ago and now it trades at 6 times earnings) Agco had a P/E of 11 or 12x when it traded at 30. It looked VERY cheap, even relative to its competitors. And now the stock price is 11, it trades at 5 times earnings. I made a terrible mistake on this one which cost my firm's clients dearly. Thats a lesson learned the hard way. Jim