LU [Archive]

**shu_wd** Mon Nov 14, 2005 11:06 pm

LU
Blast,

Since there is a lot of discussions on NT in your private thread, it stirs me the question to LU which is also Mr. Cramer's favorite pick right now and I think it's better to move this topic here.

I realize you mentioned before that you generally don't like telecom sector, but if from purely value analysis perspective, how do you evaluate LU compared with NT? LU right now has PE < 10 and positive earnings. Do you think this kind of business will also be impacted a lot from the high inflation rate in the coming years? Do you believe next high tech rally will be coming soon to give this sector a revolutional price rally ? :)

Thx

**grus2003** Tue Nov 15, 2005 12:46 pm

Re: LU
If you ask me, I would say forget about NT & LU. These two stocks are favorites of Chinese oversea stock poeple, but they are just JUNK & will disappear in coming years. I don't see any hope. Chance of truning around is trivial.

shu_wd wrote: Blast,

Since there is a lot of discussions on NT in your private thread, it stirs me the question to LU which is also Mr. Cramer's favorite pick right now and I think it's better to move this topic here.

I realize you mentioned before that you generally don't like telecom sector, but if from purely value analysis perspective, how do you evaluate LU compared with NT? LU right now has PE < 10 and positive earnings. Do you think this kind of business will also be impacted a lot from the high inflation rate in the coming years? Do you believe next high tech rally will be coming soon to give this sector a revolutional price rally ? :)

Thx

**blast_investor** Tue Nov 15, 2005 2:21 pm

Hi shu_wd,

I would agree with grus on both NT and LU. I do not like Telecom business or telecom stocks.

LU is better stock than NT because it reported positive earning recently.

On the other hand, if you look deeper into LU's cash flow, it is not truly positive cash flow. LU made profit (as reported by earning report), but LU needs to put this large amount of earning back into buying marketable securities. I do not know exactly why, but LU said in SEC filing that this is mainly due to pension credit.

Therefore, LU has no real profit from operation cash flow, all the reported profit has to satisfy the pension requirement first.

**blast_investor** Tue Nov 15, 2005 2:30 pm

One metrics that scares me off Lucent technology stock (LU) is this:

Price to book ratio of LU: 26

In my belief, only consumer manopoly stocks such as Anheuser-Busch (BUD) or Coke (KO) deserve such high price to book ratio. LU does not.
Too expensive stock, too risky.