In perhaps one of the greatest living-below-your-means stories ever told, New York University sophomore Steven Stanzak lived in the basement of the school's library for the past eight months. University officials recently got wind of his plight (he couldn't make his housing payment; tuition alone is about $31,000 per year at NYU) via a Web blog and gave him a free dorm room.
"I thank everyone who helps me get through the day, and makes me realize that although I'm poor and live in a library... that I'm learning a lot about life, and that I will make it through this," he wrote on his website earlier this month. Amen, brother. Graduation's only two years away.
In today's Motley Fool Take:
- Feeling Nortel's Pain
- Shameless Plug: Broker Center
- Comcast Is a Cash Machine
- Discussion Board of the Day: Chicago Mercantile Exchange
- Moody's Good Mood
- Quote of Note
- More on Fool.com Today
Feeling Nortel's Pain
By W.D. Crotty
It wasn't long ago that shareholders of Nortel Networks
Since hitting bedrock at less than a buck, the stock clawed its way back to peek above $8.50 per share in February, which includes a 120% gain over the last 52 weeks. The stock had trailed off of late, but shareholders couldn't have guessed what was to come.
Before today's open, Nortel announced that its president and CEO had been "terminated for cause." Those are three words you never want to hear because they always mean bad news. But it gets worse. Also terminated with cause were the chief financial officer and controller.
It only follows that results for 2003 will be revised and restated along with those of prior years, and that the financials will be filed late. In other words, what little shareholders thought they knew is not accurate, and where their company sits today is more in doubt than ever.
What were these shareholders thinking? They were praying that 4.3% operating margins would expand to 28% -- matching those of industry leader Cisco Systems
Likely, Nortel shareholders watched the progress of competitor Alcatel
The good news from here is a deal with Verizon
Contrarians claim they like to invest when blood is running in the streets -- well, it's running. Those who don't like the sight of blood should focus on quality management, strong balance sheets, and valuation. We can't always avoid trauma like we got with Nortel today, but an eye on these three goes a long way.
Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.
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Comcast Is a Cash Machine
By Phil Wohl
Investors had to use a scorecard this morning when Comcast
The big immediate news was Comcast's withdrawal of its $48.4 billion hostile takeover bid to acquire Disney
The other quieter but just as important news from Comcast was its first-quarter earnings announcement. The cable giant earned $0.03 per share versus a loss last year of $0.13, but the results were about $0.04 short of expectations. The good news is that cable revenues were up nearly 10%, and high-speed Internet revenues were 42% higher.
All of today's activity might put Comcast in a catch-22 position. The company's operations produce so much green that they could set up a machine and program it to accept PIN numbers. With Comcast expecting to produce in excess of $2 billion in free cash flow in 2004, money will available for the company to make another pass at an acquisition or to repurchase some of its own shares.
However, Comcast runs the risk of making an acquisition simply to make an acquisition; what I mean by this is that it must choose a company that is a good fit and will provide both cost savings from operating synergies and additional revenue-generating opportunities.
I don't think that Comcast is in a unique position with its ever-flowing cash stream. Competitors such as Cablevision Systems
A potential strategy for the cable companies would be to save up their cash and wait for an exciting entertainment industry purchase to materialize. Of course, with so much competition to spend the almighty dollar, any acquisition idea would be as unique as promising to go on a diet as a New Year's resolution.
Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
Di scussion Board of the Day: Chicago Mercantile Exchange
Are commodities and futures markets your thing? What's in store for the Chicago Mercantile Exchange in the quarters and years ahead? Check out our Chicago Mercantile Exchange discussion board to throw in your two cents -- and learn a whole lot more. Only on Fool.com.
Moody's Good Mood
By Nathan Slaughter
The good times just keep on rolling at Moody's
Moody's provides an invaluable service to investors, greasing the wheels of the capital markets by evaluating the creditworthiness of more than 200,000 corporate and government entities worldwide. Moody's is part of the ratings triumvirate, along with McGraw-Hill's
As expected, Moody's saw across-the-board strength in the first quarter. Excluding 200 basis points from the impact of a rising euro, ratings revenues grew 15% to $261.9 million. Much of this was due to increased issuance of commercial and residential mortgage-backed bonds in the complex (but profitable) global structured finance segment.
Corporate finance revenues were up 24% to $76.3 million on increased activity in the high-yield arena. Research-related revenues were particularly robust, leaping 41% to $40.5 million. Finally, subscription revenues from Moody's KMV, which provides risk-assessment software to banks and institutional investors, rose 16% to $28.8 million.
Fans of free cash flow (and who isn't?) should love Moody's. Capital requirements in the credit rating agency are low, and operating margins sweetened over the first quarter to 55%. Management has historically utilized cash, which last year topped $400 million, to make strategic acquisitions, buy back stock, and boost dividend payments.
At 25 times forward earnings, Moody's is richly valued, and deservedly so. The company is in a fantastic strategic position. It's the market leader in a high-margin business that, thanks to stringent SEC requirements, is very difficult to enter. However, the threat of higher interest rates will likely curtail the issuance of new debt offerings, and remains a caveat. Still, management is expecting a reduced but respectable growth rate in the high single digits over the next year.
Not to bang our own gong, but Tom Gardner recommended Moody's as his first-ever pick in Motley Fool Stock Advisor. The stock is up nearly 65% since the April 2002 inaugural issue, versus the S&P 500's return of -3% over the same period.
Fool contributor Nathan Slaughter owns none of the companies mentioned.
""Glory is fleeting, but obscurity is forever." -- Napoleon Bonaparte
Diversification is usually a road to mediocrity for small companies. Tom Gardner shows how the truly great ones stay focused in Focus! Focus! Focus!... And Bill Mann explains the hows and whys of one of the most important tools in financial analysis. Read on in Select Stocks Using ROE.... Everyone is asking, What does it mean to the economy if the housing bubble bursts? Salim Haji gives us a preview in Select Stocks Using ROE.... Last but not least, Robert Brokamp has the ins-and-outs for all those thrifty folk who want a Big Fat Cheap Wedding.
In other news:
- Tasty Baking Beats Atkins
- Jamming With Guitar Center
- Scotts Turns Grass Into Cash
- Estee Lauder Lives On
For a list of all our stories from today, see our Today's Headlines page.