The more I think about its BUSINESSES, the more interested I get. I do not believe that the Management at the subsidiary level were in on the shenanigans. ADT, Mallinkrodt US Surgical AMP Kendall I can remember when some of these were public companies. I know the KOZ and Swartz(Must be shown door) are greedy but I don't believe there are disastrous accounting issues here. I hope this thing plunges again on Monday. The SEC scrutinized the books last year.
I want to look at some of the credit triggers if they hit junk level.
$4 bil in cash in bank, $2.5 bil in freecashflow this year, below projections $4 bil for CIT
$1.5 Bil in debt in 2002 and $9.8 billion in 2003. $2.3 bil can be paid in stock. There are questions here and will continue to analyze the situation.
Or maybe I should start concentrating my portfolio so I don't look at questionable companies. Buy only 6 stocks as opposed to my current 14. You get sloppy when you diversify. You are willing to accept less.
Yes indeed, I in fact this morning went to the Tyco homepage and printed out a list of just the flow control and fire and security companies. Two or three pages of subsidiaries!! Not to mention CIT and the tons of other smatterings of companies that they own. I look at it this way, if you can pin point the total amount of debt that they have, both short term and long term then you have a starting point. I find that, then add 10% as a margin for error. Then look at the market cap. Add that to it. Now figure out the cash flow and divide the (debt*110% + market cap)/cash flow and see what kind of ratio you get. If you get a decent ratio like say 25 then it starts getting interesting.Tyco is getting there but I am still waiting to see maybe 8 a share.
There are certainly interesting companies that are currently part of Tyco, and indeed many of them make things that people need and appear to have business that makes sense. The trouble that I have is that the parent co. is obviously run by a bunch of crooks, and the debt burden that is known may not be the full story.
I'm sure that Warren might be interested in buying some of these companies out of liquidation if it comes to that. Or it TYC was such a great steal, he would probably consider the common.
Bottom line is that I don't have the time to ferret out the truth from the BS myself, and if there are any huge opportunities here, I'll let Warren do the hard work for me! Many of these subs are big enough to be interesting for Berkshire.
Isn't it great to have the most brilliant investor in history basically working for us for FREE!
Looks like Clipper agrees; TYC is now the 2nd largest holding in the fund up from 5.2% to 6.2%. Up until a couple of months ago TYC was my largest holding. I've liked and studied their business's for over 7 years-the bottom is that they do make things people need and the companies that they acquired where not debt laden and over priced, they were for the most part cheap because the "New Economy-Internet" stocks were getting the headlines. That said the debt is a very real issue here and the reason I pared back my holdings.
~~Looks like Clipper agrees; TYC is now the 2nd largest holding in the fund up from 5.2% to 6.2%.~~
Hylemon, are you sure of that percentage?? I checked Clipper's website and I see there that as of 5/31/02, Tyco was 6.2% of Clipper's equity portion of their portfolio (and equities made up just 66% of the total portfolio at that time). But it is very significant that Tyco's share price was cut in half in the past week; it stood at $21.95 on May 31 but it closed at $10.10 on June 7. For Clipper to currently be holding 6.2% of their equity port in Tyco, Gipson would have to have been doing some very serious buying of Tyco this past week. Do you know if that is the case?