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Saturday, July 16, 2005

Burnham Holdings (BURCA)

This company (website) sells air conditioners, and various HVAC stuff. They seem to be run well.

Sales have been increasing over the last 10 years (only 2002 was a down year). Gross margins took a hit this year with the spike in materials costs. They view it as a short term effect and I would tend to agree.

25% gross margins
7% operating margins
3.8% net margins

Assets are mostly PP&E (about half depreciated), inventories, AR, other assets. Debt/euity is about 0.33. Not much in stock options. Pay out a significant dividend, increasing routinely. Cash flow is kinda ugly. Small pension liability: expected return of 8.50%, not much underfunded, this is not an issue from what I see so far.

Sales took a hit in Q1 and expenses were up. 40 cents a share loss. They're expanding a plant (consolidation move). Book value is over $20/share. Earnings average about $2.20/share. Dividends are $1.12. Stock is worth about $33. Shares are selling for $25.

Not cheap enough, but definitely worth following.

I've owned this one for a about 18 months. Nothing really to add to your comments, I agree with them. For me this is a "ballast" stock, which I expect to hold forever with a total annual return of maybe 9-10%. They could easily list on a major exchange but prefer more of a partnership environment. Someday I'm going to make the annual meeting in Lancaster, PA...The even serve lunch! This is a GREAT blog. I admire your analytical skills and energy. Have seen you around on various boards and always liked your style. Actually the first recollection I have of your posts is on a topic I'd rather forget: ACLN
I know what you mean about ballast investments.

Actually, one of my brokerage accounts is set up to always refer to me as "Mr ACLN" so that I never forget: the first time in 27 years the SEC shut down a NYSE stock. I figure if you're going to screw up, do it in a big way.

One reason I make a big deal about red flags nowadays is because ACLN gave off all sorts of red flags. When I'm done looking at a stock, I step back and look for any sort of patterns in the red flags.
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