As the war goes, so goes the market.
With news that coalition forces battered two Iraqi Republican Guard divisions to the point that they are "no longer credible forces," the major indexes rallied about 3% today.
Meanwhile, there was new life amid the destruction. An Iraqi woman flagged down a military ambulance in Nassiriya, and 20 minutes later U.S. Marine surgeons helped her deliver a healthy, 6-pound baby girl.
What to name her? "The grandmother wanted Americana or something, but the mother wanted Rogenia," one of the surgeons told Reuters. The mother won.
In today's Motley Fool Take:
- The Pitfalls of 0% Financing
- Quote of Note
- Berkshire Builds With Clayton
- Shameless Plug: Help With Taxes and More
- First Data Buys Concord EFS
- Discussion Board of the Day: eBay
- Quick Takes: Biogen , Overture, Circuit City, more
- And Finally...
On Monday, General Motors
Should you take the bait? Probably not.
The standard Foolish advice when it comes to buying a new car is, "Don't do it!"
Why? Because vehicles are depreciating assets. Yup, that's right: All that iron, glass, and plastic loses value over time.
How big a bite is this depreciation? On average, cars (and trucks, too) lose more than 20% of their value in the first year. Some vehicles lose as much as 40%. The second year isn't much better, as they disintegrate another 15% or so in value.
If your current vehicle has any life left in it, put off sending it to the junkyard as long as possible. Even if you have to spend $1,000 a year to keep it running, that's cheaper than the $3,750 in car payments you'd fork over if you financed $15,000 of a car purchase over 48 months, even at 0%.
Of course, cars are merely metal -- at some point, they all take their place in that great drive-in in the sky --which means you'll need to get another set of wheels. Should you jump at 0% financing? Here are some considerations:
With loan rates historically low, you might be better off taking the rebate and getting the auto loan from someplace other than the dealer. Calculate whether the rebate would be your best bet by visiting our online calculators.
Due to fast depreciation, a used vehicle can be half the price of a new car. Of course, you risk ending up with a lemon. But if you do your homework and buy from a respectable dealer, you could save thousands of dollars -- even without 0% financing.
The incentives might be offered only on cars on the lot, thus limiting your choices.
You'll have a hard time getting 0% financing if your credit isn't pretty darn good.
Some suspect that dealerships increase the price of a car to cover the 0% financing. This may or may not be true. Your best strategy is to consult an independent source, such as Consumer Reports'New Car Price Service, and find out what the dealer paid for the car.
To learn more -- including our Fool-proof way for getting the best price on a car without ever visiting a dealership -- visit our series on Buying a Car.
Quote of Note
"Never lend your car to anyone to whom you have given birth." -- Erma Bombeck
Berkshire Builds With Clayton
From the looks of it, it's yet another classic Buffett move to scoop up an industry-leading company when the time and price are right.
Clayton's been around since 1966 and handles all aspects of the manufactured home business. It builds them, sells them, finances them, insures them, and even creates communities for them. Want to buy a trailer or live in a trailer park? Clayton can hook you up.
Clayton's financing arm is a real strength, accounting for about 27% of revenues and a substantial chunk of operating income. As other players in this industry -- most notably Oakwood Homes -- have been felled by their bad financing practices, Clayton has remained strong.
Buffett's shown interest here before, providing $215 million in financing for Oakwood to help it emerge from bankruptcy. With Clayton, though, Berkshire gets a solid company that has weathered the industry's downturn quite well. Of course, in true Buffett fashion, he has no desire to impede on Clayton's operations, so the company will continue to operate out of Knoxville.
If this were another company and a different acquisition, we'd probably wonder if the price was right. However, this is Buffett we're talking about. He offered Clayton shareholders $12.50 in cash per share, a 13% premium over Tuesday's close. The deals' worth $1.7 billion, all told. Founder James Clayton and a family foundation own 28% of the company's stock and will vote in favor of the merger.
Thanks to Fool Community member Goofyhoofy, we know the story behind the purchase, which is another classic Buffett aspect of this transaction. According to an article in the Knoxville News Sentinel, a University of Tennessee finance professor gave Buffett a copy of James Clayton's self-published autobiography as a gift. Two weeks after getting the book, Buffett was on the phone with Kevin Clayton, CEO (and James's son). It took Buffett only three calls to express his interest in buying Clayton, and a mere two weeks after that first phone call, the deal was in place.
James Clayton was out of town during some of the talks, and not wanting Buffett's name to be floated around the company's open-air headquarters, he suggested a code name for him: "Mr. Sunshine." Indeed, he is.
Shameless Plug: Help With Taxes and More
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First Data Buys Concord EFS
First Data Corp.
First Data, owner of Western Union, processed nearly 9 billion credit card transactions in 2001, making it the largest merchant transaction processor in the country. Now, that may not sound like terribly exciting stuff, but throw in the fact that the company earned about $1.25 billion in 2002 doing it, and it's worth a tingle.
The Concord acquisition will help the diverse payment and credit card services firm enhance its merchant services business, which accounts for approximately one-third of total revenue.
Particularly desirable for First Data is the fee income generated from Concord's STAR, MAC, and Cash Station ATM networks. These fees represent about 62% of Concord's revenues, so the purchase will significantly improve this aspect of First Data's income stream. This is important because fee income can be the lifeblood of a financial institution during periods of economic weakness.
Besides its strong fee revenue, Concord has achieved further insulation from the economy by positioning itself in areas such as grocery transaction processing and offering financial solutions to trucking firms. It is also one of the fastest growing companies in transaction processing, and more than 90% of the firm's revenues are recurring.
Of course, a good acquisition consists of more than just buying a good company. Price matters. On that front, Concord shares have tumbled this past year from about $35 to their recent $12.44. The drop can largely be attributed to fears it is in danger of losing several contracts with the banks in its ATM network. Many of the contracts are up for renewal next year. There was also a rumor of a possible SEC inquiry, which was denied by the company and has, at present, not come to pass.
By purchasing the firm and combining their respective ATM networks, First Data is effectively snatching up Concord shares at a discount, and removing much of the worry that caused the discount in the first place.
First Data will issue about 200 million shares to complete the purchase, and the deal will have no impact on pre-charge '04 earnings per share, but will be accretive in '05. Though the purchase is dilutive to shareholders, it will result in an estimated $230 million in cost savings.
At nearly 17 times free cash flow, First Data shares don't exactly qualify as cheap, but due to its market-leading position, diverse revenue stream, and now its eye for quality acquisitions, it is certainly worth watching.
Discussion Board of the Day: eBay
Given the potential for a "Patriotic" witch-hunt, is eBay right to fight the Patriot Act allegations? Was PayPal a smart acquisition, in retrospect? All this and more -- in the eBay discussion board. Only on Fool.com.
Human Genome Sciences
Following on the heels of rival Best Buy
Today on Fool.com:
- For updated stories throughout the day, bookmark our ever-changing News section.
- April Fools'! Yesterday's penny-stock newsletter was a joke. Here's the takeaway.
- Can America's largest tobacco company deal with a $12 billion bond payment without collapsing? Bill Mann puts Altria under the microscope.
- Can you count on your pension plan in your golden years? Robert Brokamp helps you determine if your pension's in trouble.
- A "Patriotic" Witch-Hunt: The Patriot Act leaves few sites immune, and some refuse to gamble.
- Home improvements that pay off in the long term, and those that don't.
- In Fool's School, is your company becoming more efficient and profitable? Examine its income statement.
Bob Bobala, Robert Brokamp, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim