To: cfimx who wrote (7175) | 5/17/1999 2:13:00 PM | From: jeffbas | | |
NO! Basic Buffett would be that you do not load up a cyclical company so that debt equals four times equity. My point about using stock was from that perspective. We now have a company that might not survive a serious world wide recession. In my opinion, NH should have offered 2 1/2 shares of stock for 1 and sold CSE that the synergies at that price would have caused both stocks to rise dramatically. THAT is a Buffett deal that makes sense for the balance sheet and both companies' shareholders. Had that been done, CSE might now be the same price and NH several points higher.
What was done was just stupid and reflects the conflict of interest Fiat has versus NH shareholders in not wanting to give up contol.
This reminds me of a true story. Mutual Benefit Life was a large old line mutual insurance company of excellent stature. In the 80's they loaded up their balance sheet with real estate that in the ensuing real estate depression caused the company to go out of business. In effect they ran their business ignoring the low probability "tail" of a really adverse environment. Similar situation here.
As far as stock prices go, your point is well taken. However, these are highly analyzed institutional stocks. While the absolute values change with the market prices over time, I really do believe that going outside historical price relationships is asking for trouble. Note the study that was referred to on this thread last week that most premiums paid never are justified by the synergies achieved. |
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To: jeffbas who wrote (7170) | 5/17/1999 3:06:00 PM | From: Michael Burry | | |
Mike, there is no way that you could view this as a value stock now.
Agreed. Margin of safety gone. Absolutely ridiculous. I had sold the VSN shares last week, and rid the remainder of my accounts of NH today.
Mike |
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To: jeffbas who wrote (7177) | 5/17/1999 5:00:00 PM | From: cfimx | | |
>>2 1/2 shares of stock for 1 and sold CSE that the synergies at that price would have caused both stocks to rise dramatically. THAT is a Buffett deal that makes sense for the balance sheet and both companies' shareholders. Had that been done, CSE might now be the same price and NH several points higher.<<<
you don't know if they would have RISEN DRAMATICALLY because you don't know what the combined company would earn on a per share basis, based on a more than doubling of the nh share count. If you do know what "new" nh will earn on a per share basis based on over 330 million shares out, please tell us. Because the shares WILL and do trade on that expectation, and not because you think there is "synergy." What are the numbers?
with all due respect... |
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To: cfimx who wrote (7179) | 5/17/1999 6:59:00 PM | From: jeffbas | | |
Twister, we just do not see eye to eye. I am not spending my time working up some numbers for a stock I no longer own and I do not care if you get more per share out of paying $55 cash than the 2 1/2 shares of stock I postulated. It is not a conservative business strategy for sure and possibly not even a prudent one, as I pointed out in my Mutual Benefit example.
As Mike aptly pointed out, there in no longer a margin of safety that we value investors like to have. |
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To: jeffbas who wrote (7180) | 5/17/1999 8:11:00 PM | From: cfimx | | |
>>I am not spending my time working up some numbers for a stock I no longer own and I do not care if you get more per share out of paying $55 cash than the 2 1/2 shares of stock I postulated. It is not a conservative business strategy for sure and possibly not even a prudent one, as I pointed out in my Mutual Benefit example.<<
I guess my point, and I'll make this for others, is that it's unlikely that EITHER alternative was the prudent course. Borrowing the purchase price results in a much too leveraged capital structure, while issuing shares would have resulted in a dillution of intrinsic business value for the owners of "new" nh. |
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To: jeffbas who wrote (7177) | 5/17/1999 8:32:00 PM | From: Ed Pirtle | | |
It seems to me that AAPL is incredibly undervalued when you consider its industry performance in the last 12 months and its PE is a measly 14... I think as the day traders mature and value becomes more important, its cap will increase by 200% to 300% in the next 12 months. "Wintel," while dominant has too many players fighting over the bone. I strongly believe that visionary companies will prevail, don't you??? |
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To: cfimx who wrote (7181) | 5/17/1999 8:42:00 PM | From: jeffbas | | |
Twister, you tempted me to respond once more <ggg>.
When NH was at $9 and CSE was trading at $18+ (if I recall correctly), a 2 1/2 for 1 share deal for CSE would have had analysts falling all over themselves saying what a good deal NH got, a modest premium, synergies, a larger more stable company, at least the same if not higher projected EPS, solid balance sheet, etc. It does not change a bit if this happens when NH has doubled if you pay in stock.
However, if when NH was $9 and CSE $18+, NH offered $55 cash, the analysts would have fallen all over themselves saying what complete idiots NH was, blah, blah, blah. It only changes very slightly if this happens when NH and CSE have risen dramatically (relating to possible future NH equity offerings at better prices to reduce the debt).
Enough said.
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To: Ed Pirtle who wrote (7182) | 5/17/1999 8:56:00 PM | From: jeffbas | | |
You are asking the wrong person.
On AAPL, there is a difference between $44 and $34 for a value investor.
Furthermore, the BIGGEST investment mistake I have ever made BY FAR is to buy value in technology instead of the leader. I believe the only investing strategy in technology that achieves consistently good results is wait for some decent correction and buy the best.
Too often, technology turnarounds don't turn around or turnaround twice, ending up where they started. A second tier value technology company is more likely to end up third tier than first tier.
(The above is not intended as a specific comment on AAPL.) |
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To: jeffbas who wrote (7184) | 5/17/1999 9:29:00 PM | From: Grant | | |
OT...OT...would someone help me help a friend study for an Econ test...please answer the following..
20) If the supply of a product decreases and the demand for that product simultaneously increases, we can conclude that equilibrium; (a) price must rise, but equilibrium quantity may either rise, fall, or remain unchanged. (b) price must rise and equilibrium quantity must fall. (c) price and equilibrium quantity must both increase. (d) price and equilibrium quantity must both decline. (e) quantity must decrease, but equilibrium price may either rise, fall, or remain unchanged.
21', Given a downsloping demand curve and an upaloping supply curve for a product, the imposition of an exercise tax on this product will: (a) increase equilibrium price and quantity. (b) decrease equilibrium price and quantity. (c) decrease equilibrium price and increase equilibrium quantity. (d) increase equilibrium price and decrease equilibrium quantity. (e) have no impact upon equilibrium price and quantity.
(Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 -0.2Q and supply by the equation P 2 + 0.2Q.
22. Refer to the above information. The equilibrium quantity is: (a) 10. (b) 20. (C) 15. (d) 30. (e) 45.
2311 The income and substitution effects explain why: (a) the elasticity of demand can be unity. product demand curves are downsloping. (c) product supply curves are upsloping. (d) equilibrium is always achieved in a competitive market.
48) Which of the following is not correct?
(a) Where marginal product is greater than average product, average product is rising.
(b) Where total product is at a maximum, average product is also at a maximum.
(c) Where marginal product is zero, total product is at a maximum.
(d) Marginal product becomes negative before average product becomes negative.
49:~ Average fixed cost:
(a) is intersected by marginal cost at its minimum point.
(b) may be found for any output by adding average variable cost and average total cost.
(c) graphs as a U-shaped curve.
(d) declines so long as output increases.
50) Which of the following is correct?
(a) Average variable cost intersects marginal cost at the latter's m . inimum point. (b) Marginal cost intersects average total cost at the latter's minimum point.
(c) Average fixed cost intersects marginal cost at the latter's minimum point.
(d) Marginal cost intersects average fixed cost at the latter's minimum point.
51) Assume that in the short run a firm which is producing 100 units of
output has average total costs of $200 and average variable costs of
$150. The firm's total fixed costs are:
(a) $5,000.
(b) $500.
(c) $.50.
(d) $50.
52) If the total variable cost of 9 units of output is $90 and the total
variable cost of 10 units of output is $120, then:
(a) the average variable cost of 10 units is $12.
(b) the average variable cost of 9 units is $10.
(c) the marginal cost of the tenth unit is $30.
(d) the firm is operating in the range of diminishing marginal returns.
(e) all of the above are true.54) Economies and diseconomies of scale explain: the profit-maximizing level of production. why the firm's long-run average total cost curve is U-shaped. (c) why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum*point. (d) the distinction between fixed and variable costs.
55) Diseconomies of scale arise primarily because: (a) the short-run average total cost curve rises when marginal product is increasing. (b) of the difficulties involved in managing and coordinating a large business enterprise. (c) firms must be large both absolutely and relative to the market in order to employ the most efficient productive techniques available. (d) beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital).
56) If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, we can say that: (a) it is encountering diseconomies Of scale. (b) it is encountering economies of scale. (c) the law of diminishing returns is.taking hold. (d) the firm's long-run ATC curve will be rising.
57) Which of the following is not a basic characteristic of pure competition? (a) considerable nonprice competition (b) no barriers to the entry or exodus of firms (c) a standardized or homogeneous product (d) a large number of buyers and sellers
58) Price is constant or "given" to the individual firm selling in a purely competitive market because: (a) the firm's demand curve is downsloping. (b) of product differentiation reinforced by extensive advertising. (c) each seller supplies a negligible fraction of total supply. (d) there are no good substitutes for its product.
60 A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating: (a) price and average total cost. (b) price and average fixed cost. (c) marginal revenue and marginal cost. (d) price and marginal revenue.
61) In the short run a purely competitive firm which seeks to maximize profits will produce: (a) where the demand and the ATC curves intersect. (b) where total revenue exceeds total cost by the maximum amount. (c) that output where economic profits are zero. (d) at any point where the total revenue and total cost curves intersect.
62) Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. On the basis of this information we can say that the corporation: (a) should close down in the short run. (b) is maximizing its profits. (c) is realizing a loss of $60. (d) is realizing an economic profit of $40.
63) A purely competitive firm's short-run supply curve is: (a) perfectly elastic at the minimum average total cost. (b) upsloping and equal to the portion of the marginal cost curve which lies above the average variable cost curve.
The demand curve in a purely competitive industry is while the demand curve to a single firm in that industry is ,(a) perfectly inelastic, perfectly elastic (b) downsloping, perfectly elastic (c) downsloping, perfectly inelastic (d) perfectly elastic, downsloping
Thanks in advance and sorry for being a bother,
Grant |
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