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MUTUAL SERIES FUNDS'
MICHAEL PRICE ET AL.
(continued from preceding
page)
But then the music stopped.
OID: I'll say. I see that Horizon is selling well below its $13 book today.
Garea: That's right. And you mentioned earlier how their returns haven't been that great. Well, that's because they were busy playing the old Wall Street game - you know, where if Wall Street's willing to capitalize you at some outrageous multiple, you keep issuing your stock.
OID: In other words, if Wall Street could take a joke, they could, too.
Garea: And, basically, all of the nursing homes traded at something north of 20 times earnings.
OID: But, in effect, Horizon's behavior wasn't altogether irrational.
Garea: Exactly.
SO THEY'LL PROBABLY BE A CONSOLIDATEE.
Garea: I don't think he had anything specific in mind.
OID: What's your assessment of management?
Garea: They're tired.
OID: How do you mean that?
Garea: When you've been through the wars too many times, you just get too tired to do it again. You can run Gillette for a long time - well up to an age where most people would just think, "Maybe I should think about doing something else."
OID: It's not like dog years or, even worse, OID years...
Garea: Exactly. Running a company like Gillette just doesn't wear you down the same way. But when you're in a business where you have to go through one big problem after another - you're always dealing with the government and so forth - it just takes its toll.
It's tough. It's like Tenet Health Care - what used to be National Medical Enterprises. They started their company with a single hospital and built it into an enormous company with psychiatric, rehab and acute care hospitals - until it was one of the biggest health care companies in the country. They had problems at different points, but it was a great story.
But they got to a point where they had huge problems and they just couldn't deal with 'em. It got to where they became the problem. That's just the way it works.
OID: Interesting. And the implications for Horizon?
Garea: It's not like we're going to throw management out or anything like that...
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