bradiop

Ethanol vs. Natural Gas or Coal: Comparison Not Even Close

Good article, well written, great facts and conclusions.
brad

10 Dangerous Stocks to Avoid

I concur, the analysis is far short of being very deep. Would one look at Debt for company such as GM and equate it the same as to railroads or others with good cash flow. I own EPD and as other have mentioned when you have a solid business, nearly guaranteed cash flow with growth opportunities I would suggest not all Debt looks the same,


On Apr 04 11:01 AM Sanitychecker wrote:

> Let me guess you are short some or all of these stocks. Naked short?
> You may want to reevaluate that decision on some or all of them.
>
>
> You are right. Leverage can be a good or a bad thing. It must be
> investigated. So let's see what is under the covers of IBM during
> the period you show the most dramatic increase in their debt to equity
> ratios between 2007 and 2008.
>
> The ratio can change higher by debt rising or the equity position
> falling. Debt rising occurs from taking on more debt ( more troublesome
> might be exchanging higher coast debt for lower cost debt but we
> won't digress since that didn't happen). The dollar amount of stock
> holders equity can fall due to a fall in the price of stock or reducing
> the number outstanding shares.
>
> During 2008, IBM issued $13.8B new long term debt and retired $10B
> for a net increase of $3.8B in debt. That would increase their LT
> Debt to Equity ratio. They also repurchased $10.6B worth of equity.
> The result of both would decrease their debt to equity ratio so why
> did it increase? Oh. yea! The price of the stock must have dropped
> some during 2008. Between January 2nd and December 31st 2008, IBM
> stock fell over 18% (it actually had a 45% swing from high to low
> during the year) So. IBM is making positive moves in their capital
> structure but being penalized in the capital markets.
>
> Perhaps a better way to look at the possible consequences of a high
> debt to equity ratio is to look at how well IBM can afford the level
> of debt it has taken on. Let's see. Between 2007 and 2008 , IBM's
> Gross Income has risen from $41.3B to $45.34B, EBIT increased 18%
> from $15.1B to 17.4B, Net Cash Flow from operations increased 17%
> from $16B to $18.8B, Capital surplus increased from $34.8B to $38.8B
> and Retained earnings grew from $60.7B to $70.35B. And most important,
> their interest coverage ratio is 25.8 times. It doesn't seem to
> be an issue for IBM to pay it's Long Term Debt obligations, nor does
> it seem that their Income Statement, Balance Sheet, Capital Structure
> or Cash Flow would give ANY bank or lender pause.
>
> I wouldn't be surprised to see you didn't do your homework on any
> of the other stocks as well. I suggest you find a different advertisement
> of the advice you have to offer from your web site........... (In
> full disclosure, I own COP, IBM and ETP(closely related to EPD),
> all for different reasons but for reasons based on research and analysis
> of fundamental and technical reasons. That is the bottoms up part.)