Tuesday, February 07, 2006

Sometimes I think I am stupid...until I look at numbers.

If I rip on google, and wait for that boat to sink (the stock price, not the company) than I must admit when my picks faulter.

Cendant. Cendant is in the midteens right now. It doesn't make sense to me. I think its worth 30, and the market thinks its worth 15.

So I went and did some homework to see if anything changed since last time I looked at them. I see that there market cap is $16MM. (market cap = number of shares X price per share). I see their cash flow from operations was 5B last year. This means in 3 years they would buy back all there shares if they wanted to.

That is some strong cash flow!

They have 30 billion is liabilities. In 6 years they could pay off all of their debt.

That is some strong cash flow!

Cash is king. The ability to generate cash from sales is what makes a company strong. A good idea does not make a company strong. The ability to turn that idea into sales, and then turn the sales into cash is what makes a strong company.

The market and masses are wrong. again.

...(this is what I call opportunity.)


Anonymous Anonymous said...

sometimes cash is not king... If a company is bringing in loads of cash and not doing anything with that cash, we have a problem. Right, they can decrease debt... but will they? We see that management is not maximizing the value of the shareholder and thus making the investor uneasy. If you believe it is undervalued, go with it. I am sure the price will come around.

Thu Feb 09, 02:32:00 PM EST  
Blogger Greg said...

Oh, I do go with it. My money is always where my mouth is.

Cash is always king.

Cash is why you are in business. There is no other reason to be in business than how mych cash you can generate. Its the bottomline. Literally.

How do you maximize shareholder value when you have alot of cash? Buy back bonds. Cendant has done that. Buy other companies. Cendant has done that. Buy back your own stock. cendant has done that. Declare a dividend. Cendant has done that.

The masses are wrong about Cendant. They don't understand them so they ignore them.

Let me give an extreme example of why cash is king. Let's say a company has 50 billion in cash, and a market cap of 10 billion. So you could buy the company for 10 billion dollars, and then you can liquidate their 50 billion that is in the bank. Even though the company didn't maximize shareholder value, doesn't mean that there isn't value. It means the value hasn't been uncovered.

I will keep buying cendant with whatever cash I have until they are in the 30s.

Thu Feb 09, 03:03:00 PM EST  

Post a Comment

<< Home

Website Counter
island drafting and technical institute