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

To: Mike 2.0 who wrote (6172)	3/3/1999 1:14:00 AM
From: Brendan W	Respond to of 78486

Any opinions on Foster Wheeler? This is an S&P 500 company in engineering and construction. o Market cap is around $488 million on a price of $12, equity $572 million (about 85% of market cap) o dividend yield is 7% o debt is around $1 billion but management is planning on asset sales and a preferred issue to bring this down substantially. Valuline rates the financial strenght at B++. o Rev's are about $4.5 billion with a PSR of about .11. This is very low historically for the company. o The stock price is 75% off it's '97 high and trades at levels not seen since the '87 crash when it generated about one third of current revenues and cash flow (on a per share basis). I'm taking a small position.

To: Mike 2.0 who wrote (6172)	3/3/1999 9:45:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 78486

Mike, >>I suggest you check out the premium Buffet paid for Dairy Queen (INDQA I think was the symbol); how did he calc it? << That was one of the deals I casually looked at in my effort to understand the values in that business. My "guess" is that he liked it because they make a lot of their money as franchisers as opposed to owners. That model has an advantage over ownership in that the capital expenditures are lower. (offset by slightly less money making in ownership) If I remember correctly, the ROE was about 20% (give or take). That's pretty impressive. The free cash generation was also high. Lastly, they also had what I would consider to be excess cash on the balance sheet that could immediately be depoloyed elsewhere. So if you subtracted the excess cash, adjusted earnings for interest income, the price starts looking kind of attractive even though it was a slow grower. Buffett can always deploy the excess cash and future free cash into more profitable ventures where Dairy Queen seemed more limited. My thinking on Sbarros was the same when I bought it. But that deal has not worked out especially well for me even though I'll make some money. The eventual price offered by the Sbarro family to take it private was disappointing to me. Sbarro has about $5-$6 in excess cash and many other similar qualities. Wayne

To: Mike 2.0 who wrote (6172)	3/3/1999 10:16:00 AM
From: porcupine --''''>	Respond to of 78486

"Buffett Sees Danger In Stock Market" -- Reuters [The Reuters article copied below tries to make Buffett sound much more alarmist than he actually was. In fact, Buffett deftly deflected all of Koppel's invitations to cry "Wolf!", as would be expected of a great statesman of finance. porx recollection is that, in response to Koppel's question about what a 25-yr old making $20,000 to $30,000 per year should do, Buffett mentioned an Index fund, as one possibility. However, he was practically muffling the answer into his jacket sleeve, such was his lack of real enthusiasm. Perhaps he viewed it as porc does -- the lesser evil, when compared to timing. Yet, Buffett was quite emphatic on one point -- don't make any purchases on borrowed money. Not only does this mean not using margin, but, as he mentioned earlier in the interview, it means paying off credit card debts before committing any funds in the Market, as there is no realistic possibility of earning more in equities, at these inflated prices, as the 15% or more that credit cards charge annually.] WASHINGTON (Reuters) - Billionaire investor Warren Buffett said Tuesday the U.S. stock market had seen virtually unprecedented increases in recent years and was in a ''dangerous'' period that could see stock values drop sharply. Stocks had risen ''terrifically'' over the past 15 years, driven higher by lower interest rates and rising return on equity, Buffett told the ABC News ''Nightline'' program. ''After a while the very act of stocks going up starts drawing in other people who get excited about the fact that their neighbor made some money ... and that's when you get into the dangerous periods,'' he said. Asked when the bubble would burst, Buffett said, ''You never know. You know that valuations are high, by historic standard. You know that the level of speculation is high, by any historic standards, and you now that it doesn't go on forever ... but you don't know when it ends.'' Buffett told ABC's Ted Koppel the ongoing market rally had ''gathered a lot of momentum in the last few years,'' signaling that a downturn could be around the corner. ''The last three years prior to this one, when the S & P (Standard & Poor's index) has gone up 20 percent a year, that's almost unprecedented,'' he said in the television interview, filmed at a Dairy Queen restaurant in Omaha, Nebraska, where the investor lives. Buffett's holding company, Berkshire Hathaway Inc (), owns Dairy Queen. Buffett told ABC he had built a $30 billion endowment fund -- essentially his personal net worth -- for philanthropic purposes when he dies and said a team of six well-qualified people helped determine how that money would be put to use. He said one area he was particularly concerned about was the proliferation of nuclear weapons and technology, and said he was funding some efforts to study the problem. But he acknowledged that he did not know how to ''attack the problem with money.'' He said his three children would receive some money from his estate after he died, but he did not believe in the ''divine right of the womb'' and felt they should prove themselves in society, rather than inherit the great wealth he has amassed in his lifetime. porc --''''>