Alan Brochstein

The S&P 500's Strongest Balance Sheets

S&P classifies it as an "Industrial"... On your point about their balance sheet, it is quite strong compared to peers and to other business services providers, though I appreciate your comment upon their fundamental outlook.

Make no mistake, this list wasn't a buy recommendation by any stretch, but rather a list of companies that might survive better than others...


On Mar 22 08:54 PM TeresaE wrote:

> Robert Half International is NOT an industrial stock.
>
> Robert Half is an Accounting/Finance/Tech temp firm.
>
> Of course they have a strong balance sheet, you can't show people
> as assets, and their inventory (workers) is bulging while their customers
> are being bankrupted.
>
>
>

The S&P 500's Strongest Balance Sheets

They made the cut. Upon closer examination, they sure have a lot of inventory. Even if one cuts it in half, though, they still have plenty of cash and other short-term assets to cover near-term and most of their longer-term liabilities. Their FCF generation will most likely plunge, but I find it interesting that the company hasn't ever lost money over the past 35 years (which is as far back as my data goes). At 2X tangible book, though, clearly the stock has some downside if their earnings plunge.

On Mar 22 10:46 AM Gunns wrote:

> Not every day you see the argument for Nucor having "financial strength"...
>
>
> Pensions, pensions, pensions...

The S&P 500's Strongest Balance Sheets

I wasn't sure how much to restrict P/TB. It amazes me how many companies now trade at less than tangible book, but most of these have a lot of debt or tend to be very small. My main goal in including that variable was to get rid of the companies with very little (or negative) tangible equity. Clearly AAPL or PCP have a lot less downside protection than ESV or TIE in that regard. You make a very valid point, and hopefully the market will continue to recognize that some companies have intangibles that are worth something.


On Mar 22 06:45 AM Zoltan L. Kovacs wrote:

> Nice to see Apple on your list, they really deserve it. But they
> have only made it because you put hurdle rate for Price/Tangible
> Book <4. It is in fact natural for a company with such innovative
> potential like AAPL to have a price way over the value of the tangibles.

Tech May Be a Wreck, But This Isn't 2001

Thanks User 138602. I don't have an opinion on YHOO that is informed at all. I surely wouldn't want to own it if success depends upon being acquired. By many metrics (beyond PE), the stock looks very inexpensive, not surprisingly.

Tech May Be a Wreck, But This Isn't 2001

The hand, thanks for your comments. You make an excellent point - the industry is more mature indeed. I think it is a pretty bad industry quite frankly - way too much competition in many segments (semiconductors come to mind). I have just started warming up, having maintained zero or relatively low exposure for the past 15 months. One of the nice things about a recession is that it eliminates some of the weaker competitors, a process that allows the "survivors" to capture more share when the market resumes its growth. While I question the innovation at MSFT, many of the others in the large-cap Tech space will no doubt be selling things tomorrow that are quite different from today.

Tech May Be a Wreck, But This Isn't 2001

Thanks, Dr. O. I surely appreciate your point and believe it is mainly priced in, but, as you say "no one knows", certainly not me. An interesting aspect of technology is that it theoretically allows a company to "do more with less". To that extent, tech companies might surprise us.