Chicks Eye View: In Focus

NOTE: This past month we have been featuring all the companies that we proposed for our last buy. Chick Jana takes you through the steps as she does her research on Tyco.

Did you ever go on a scavenger hunt when you were a child? It was my favorite birthday party game; a list of odd items that you collected from neighbors, corner stores or from the great outdoors. I was never sure if I'd find everything on the list, but I was determined not to give up. It was always fun coming back to the party and seeing what everyone else had found on their hunt. I find writing these articles to be a little like going on a scavenger hunt. So today I'm taking you on a scavenger hunt for Tyco. Here's my scavenger hunt list: What does the company do? What's their industry? What's their history? How are their numbers? I'll show you all the places I go to find the information. So the next time you want to go on a scavenger hunt with your company, you can do the same.

The first place I go is the company's website to find all the information I can on them. When Chick Karin asked me to write about Tyco, I remembered that first heard about them from Chick Lorene. She's a mother of four and I was sure Lorene was talking about Tyco the toy company.* But after some research, I discovered I was way off. Here's the description that's on Tyco's very informative website.

"Tyco International Ltd., a diversified manufacturing and service company, is the world's largest manufacturer and installer of fire and safety systems, the largest provider of electronic security services in North America and the United Kingdom and has strong leadership positions in disposable medical products, packaging materials, flow control products, electrical and electronic components and underwater telecommunications systems." Whooaah, that's quite a long way from kids' toys. So what exactly is all that?

Here's a breakdown of the products in each of those areas taken from their website.

After understanding what they do, I'm always curious about the industry a company is in. I go to Smartmoney.com to get the industry and compare the competitors. Take a look, Tyco's industry is called a Conglomerate. What the heck is a conglomerate? (I had to look it up in my dictionary, so don't feel bad if you didn't know either) It's pretty simple; it's a company that has many different businesses within it. If we look at Tyco's competitors, you'll see some more recognizable names of conglomerates: 3M (NYSE: MMM), General Electric (NYSE: GE) and Proctor and Gamble (NYSE: PG). It looks as if Tyco is in good company. It's one of the reasons the Chicks didn't invest in Tyco this quarter. We didn't want another conglomerate, since we already own General Electric (NYSE: GE). Sometimes I like to check out the competition when researching a company. If you're interested, Chick Cheryl ran General Electric through the Chicks' Dozen back in October and Chick Megan just wrote a very funny and informative article on Proctor and Gamble!

I like companies that have been around awhile. They've road tested their businesses and know what works and what doesn't. I usually find this information on a company's website; just look around and you'll find it. Tyco was founded in 1960 when Arthur J. Rosenbur, Ph.D opened a research laboratory to do experimental work for the government. After two years he changed the focus of the products to hi-tech and energy conversion for the commercial sector. I guess Arthur was no dummy; he knew he could make more money from business rather than just the government, along with affecting more lives. Tyco has more than 220,000 employees worldwide and are in 80 different countries. I personally liked that Tyco's headquarters are in Bermuda. Nice choice, don'tchya think? I'm picturing people making flow valves and underwater cables living the good life and listening to the nice Caribbean sounds of steel drums while they work. Hmm, wonder if they have any openings?

For this I go to the Chicks' Dozen Worksheet, type in Tyco's ticker symbol, TYC, and then scroll down and put in the appropriate numbers to get their Gross Margins, Net Margins, and Sales Growth. I look at how much cash vs. debt they have and hope they have more cash. Here's a look at those numbers--I did them over the past 4 quarters and for 1999 and 2000, cuz I like to see if their numbers are going up quarterly and yearly. I go the extra mile on these scavenger hunts. You'll notice that this past year they've maintained their gross margins and net margins. But you'll notice the big jumps from 1999 to 2000. So sometimes it's good to look year to year along with quarter to quarter.

Earnings Date	3/31/01	12/31/00	9/30/00	6/30/00	FY 2000	FY 1999
Gross Margins	38%	38%	39%	39%	58%	51%
Net Margins	13%	12%	24%	13%	20%	15%
Flow Ratio	1.12	1.01	0.88	1.05	1.63	1.79
Sales Growth	11%	2.75%	5%	5%	132%, 1999-2000
Cash vs Debt	From 1999 to 2000, Tyco has maintained at least 8x more debt than cash.

One more thing I look at is what their stock growth has been over the past 5 years compared to the S&P's. I figure if they haven't beaten the S&P in 5 years, why would I want to invest in them? So Tyco's stock price growth has grown 400% compared to the S&P's 150%. Not too shabby. Here's where I get that stock growth information.

Well if you haven't been paying attention to this whole article, (there's always somebody isn't there?) Here are a few more of my favorite neighbors/sites where I know I can find my scavenger hunt information -- you never know when you're going to need to find the bronzed baby booties, oops, I mean some information on a particular company.

Hope you enjoyed your Tyco scavenger hunt as much as I did! Until our next party -- you bring the game next time!

*When on any good scavenger hunt, please be sure to get a little side tracked, taste Mrs. Campion's chocolate chip cookies, and oh yeah, you might find out that Mattel bought Tyco, the toy company, in 1997.

In Focus

A Scavenger Hunt with Tyco (NYSE: TYC)