No. of Recommendations: 2
Charlie,

Or, better, even the briefest comparative work suggests that Sara Lee’s debt should be rated lower than where it is. At every step in its yield-curve, it offers a few more basis points than its industry peers.

Using relative valuation that is the correct assessment of the data. A broader look at fundamentals suggests the credit rating is sufficient or low. From the fundy side they manage their debt well and they carry a bit more than the ratings models are pleased with. Now, if they have directionless management or one of those bloody axe wielders just took the thrown there could be different issues wandering about.

Heinz and Kellogg are pretty good peer representatives by size and industry. We see between 70 and 100ish basis point difference. CLE is possibly a classic value play. Relative to its peers its cheap while fundamentally it appears sound. What do we actually get for a 70 basis bonus? Is 70 basis enough? Is the total return enough?

Which numbers do you trust? I know Charlie's answer he is a ticker reader and this is the type of outlier that makes him fret. Years of buying has taught him to heed certain warnings. He doesn't care when he is wrong and misses out on a profitable buy because within his methods he is likely to lose more often than he wins when he bends these rules within his system.

At this point I would leave open the possibility that SLE is under-priced for what it is. I view this pricing anomaly as a potential opportunity that would require further DD and risk/reward analysis before yea or nay is declared. (all of which sounds really highfaluting but is really $10 words for a $.10 process).

Companies go in and out of fashion often for no other reason then herd/crowd mentality. I have been looking at ticker lrcx as a possible equity value play because a bunch of folks don't like it near term. I think the market has over reacted but I haven't turned over all the rocks I ought to before money leaves my account.

just kickin' tires

jack
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