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

To: Paul Senior who wrote (7345)	5/29/1999 10:52:00 PM
From: Paul Senior	Read Replies (3) \| Respond to of 78626

Getting tied up with cabling companies: Belden, General Cable, Cable Design Technologies I'll present some information on these three companies: BWC, GCN, and CDT. It will be an example of how I sometimes look at, and buy, stock in companies without going through an analysis of business strengths or weaknesses (SWOT analysis) or an analysis of their business models - or even an analysis of their basic businesses. Sometimes, for me, the numbers and other "facts" are compelling enough to allow a purchase to be made. I have been studying Belden for about 2 weeks. My initial interest was piqued when I thought that if we are going to have lots of bandwidth, we're all going to have to be wired. I saw a newspaper headline saying that California was thinking of spending $12Billion to connect their schools. I started with BWC because I've studied it once before - they imo are leaders in the cabling business. But what is the cabling business? Is it copper twist, fibre optics, idustrial, home, inclusive of connector and ancillary components, manufacturing, distribution (installation), consulting? The numbers on BWC looked good. But as I dickered with determining where a good buy price might be for the stock and what aspect of the 'industry' I was actually buying and what I should be buying, the stock moved from 19 to 24 during the past 5 or 6 days. Too pricey now, I think. I've turned my attention to two other companies. The first is CDT. A reasonable question for the entire industry might be -- just how many companies are we talking about, and when will the end be of any possible boom. After all there's just so much cabling to be done, and (I presume) that's it. There's not a lot of repeat customers, I assume. The market diminishes drastically. For me, I step aside from those issues to the insider buying that I see. IMO, the insiders are telling us that it is not now a problem and that prospects are bright. In fact, CDT has the most astonishing insider buying pattern I've ever seen. More than $2M of insider money committed to the company since March. In the approx. $11-13 range. And by several of the very same people who were selling millions of dollars of stock in Dec. @$20-24 range. I've never before seen such a quick reversal by several insiders. (I'm no insider-buying expert though.) There's other positive information too: CDT has rising sales each year since '93; pe, psr, p/bv are at lows compared to previous years. Book value is steadily increasing (although so is long term debt). There's a ROE of about 16-17% on a stated bv of about 8. Stock is at 14, up a point or so Friday: I think because their earnings, worse than the prior period, did beat analysts expectations. My guess would be that the stock drops back a bit. I'd say a fair value right now for the stock might be around 16, although it's traded at or better than 20 many times since 1996. General Cable (GCN), another company with strong (imo) insider buying, most of it at higher prices than the $15 that GCN goes for now. (Yearly trading range is about $8-32.) Revenue growth seems flat for GCN (and there's only a 3-year history). But again, psr and p/bv are at lows compared to past years' averages. The company is selling at 3x book value, and it looks like they are making 35-40% roe. The pe is about 9. They announced they were going to close a marginal plant, but whoops, business picked up and/or the plant got profitable, so they rescinded that idea. I've taken small positions in both these companies. Not that I'm right to to do it. I've been wrong many times before (such as: failure to take account of industry trends in the disk drive business). JMO. Paul.