L-3 Communications Holdings, Inc. (NYSE:LLL)

Government contracts will shrink as cuts are imposed. Shorting this real life

Graham + Big Brother

Based on Graham number valuation

they suck

http://wiki.fool.com/The_Graham_Number
Formula: Fair value=Sqrt(22.5*EPS*BV) I expanded it a little by also using EPS Normalized and Tangible BV
Being that LLL's current Tangible BV is a negative number(which is of concern) I'm just using the Scottrade research data BV of $68.73 as opposed to the Fool's Stats page BV of $69.27
Using the lower one BV $68.73 with...
Fool Stats page EPS: $9.20
Scottrade research data EPS: $9.22
& Scottrade research data Normalized EPS: $9.63
So my Graham 3 Number Relative Valuations for LLL:
$119.28, $119.41, & $122.03
As I said earlier the negative Tangible Book Value is a concern, but I'm making an outperform pick here with the current price of $73.26
What my open price will be I won't know until tomorrow when my pick opens, but I'm sure it'll be pretty close to that.
Other macro events are of a concern this year such as the events in Europe and the U.S. Presidential election. It will continue to be a rollercoaster ride, but the 2.70% divi yield consistently paid out and a 5 yr growth rate of over 16% is a comfort.
All that and not to mention they're a purty durn good business.

Long-term contratian pick. Current Graham price is $115 (based on $8.77 earnings and $67 book value), compared to current price below $70, so that's a 40% margin of safety. Get a nice $2 dividend every year (2.9% yield) while waiting.

Currently depressed because of military spending cuts in the U.S. and elsewhere, but this won't last forever so it seems like a good opportunity to add this while prices are depressed. Existing aircraft will still need to be maintained and upgraded.

FDL1

Based upon historical earnings, I think this stock should be valued near $105.59 using discounted cash flows over the next 5 years. This produces a safety margin of 36%. Besides the earnings growth indicating the stock is under valued, this stock is due to have a spin-off next year which I believe will produce more value for shareholders. The only downside that I see is the pending defense cuts over the next year or so, but I believe this is a good long-term investment.

12/10

High yield strategy: TMFHighYield says to look for "high dividend payers from the S&P 500 from diverse sectors, relatively low debt, and a history of increasing dividend payments." This is my Industrial Goods pick.

piotroski screen

buy on dip

Very "defensive" business. FCF yield ridiculous at over 15%. Betting that markets are overestimating the effects of the Pentagon budget cuts.

LLL was a well run company with some impressive products and skills in the defense sector.

Now it's a well run company with impressive products and skills in the defense sector AND there's a historically successful activist fund pushing to unlock shareholder value. I'm in!

Relational Investors just reported that it is now the largest shareholder of the defense contractor L-3. I have had success following this activist investor in the past. Most recently when it successfully pushed for the break-up of ITT.

To unlock value, Relational is pushing for a the sale or spin-off of business units that it believes are dragging down L-3's performance. This may include the sale of the company's low-margin, no growth government-services division and its aircraft-maintenance division.

Divesting these businesses would enable L-3 to focus its resources on growing its high-margin businesses, including such as electronic systems and surveillance / intelligence.

Deej

Babo

Good solid company with good growth rates. I don't really think it going to blow the S&P out of the water but will stay with it.

This well run company is a steal at this price

Mission critical defense is the part of the budget that will grow, not shrink.