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

To: Michael Burry who wrote (6555)	4/2/1999 5:12:00 PM
From: cfimx	Respond to of 78644

let's see here. I guess any company that minimizes working capital, and has the misfortune to have its equity value marked down by market conditions ( the bv of the debt cannot be) is in deep doo doo. This reminds me of BETA.

To: Michael Burry who wrote (6555)	4/2/1999 5:17:00 PM
From: James Clarke	Read Replies (2) \| Respond to of 78644

OK, I checked out the bankruptcy formula. While I think screening with that formula would find you an awful lot of bankruptcy candidates, if I am looking at a business I know I am not going to use that kind of formula. The checks I will do on something like JRC are threefold: 1) Cash flow after necessary capital expenditures vs. annual interest payment. This not only gives me a degree of confidence that they can pay their interest or not, but it also tells me how much they have left over to pay down debt or grow the company. 2) Steadiness of that cash flow - purely a function of the business. 3) Is the debt fixed or floating? In JRC's case half of it is floating. If there is anything to worry about here, that's it. For another kind of business, a down and out cyclical for example, I might look at other things. JJC