Jim:     The turmoil is, at last... finally starting to create some rock-bottom values!... Not just in the companies I've been recommending... the defensive plays, the food banks, the cereals... if you can eat it, if you can smoke it, if you can wash with it, it's cool... but in actual companies that are involved in industry... even if the near term may seem shaky.

Among these companies, one strikes me as downright criminally undervalued...

And that stock is... KBR, Inc. (KBR)...

... the old "Kellogg, Brown and Root, which is spun off from the old Halliburton Co. (HAL).

People are already treating this infrastructure/outsource military services stock as though Obama's won the election, and decided to cut all ties with them, because of (Vice President) Cheney, who used to run the place. People forget that KBR was practically joined at the hip with Lyndon Johnson, and the democrats, back in 1968.

There's no reason to think that government money will stop flowing KBR's way if Obama wins...

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This company supplies services, not mercenaries, which are the subcontractors that Obama wants to get rid of. But the company's acting just like the drug stocks acted in 1992, when they were down big, reflecting a Clinton win... Remember, we went to Merck (MRK), and basically talked about nationalizing MRK... and then they took off after he won the election. The drug stocks were the best group to own after 1992 with Clinton. This group may be the best to own, after... well, if Obama wins.

KBR was spun off from HAL... thus, the Cheney hate factor... weighing on the stock heavily. It was spun off back on November 14th of 2006, when the stock closed at $20.75. We liked it then. We went really rah-rah... and the stock quickly doubled. It went up to $43.25, where it peaked.

Now it has come down enormously to $15.13...

Sorry... it looks incredibly cheap to me at these levels...

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A big part of it is the Cheney discount... the "hate discount" I call it... even though the man's had nothing to do with this company for more than eight years...

Now, in April of 2009, well after the election, KBR will at last be able to sell itself. You've got to wait two years before you can be acquired, and I think any infrastructure company in the world would be insane not to make a bid for KBR...

Now, you've got to write these down. I know that this is that kind of homework thing that everybody's eyes glaze over on... but let me spare you. I'm not going to talk about LIBOR...

KBR, given its $15 billion backlog (of pending work), and only $2.5 billion market cap, and an even smaller $889 enterprise value... the "enterprise value" is what it would cost to acquire the company at the current price... it's the market cap, plus all the company's debt, minus its cash... Well, KBR has $1.6 billion worth of cash... and no debt. A $15 stock... $9 per share in cash. That's insane... It's only a $15 stock and three-fifths of its market cap is cash?...

That means the market's valuing KBR's business as just $6 a share... It was at $40 and change... $6...

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The company's trading at just one-sixth of its backlog. I'm sorry, that's just ludicrous...

The election happens... whichever way it goes... Cheney is out of the government, the hate factor evaporates and, if you can hang on until April of 2009, KBR can, and I believe will, be taken over...

The stock is so cheap here... even if we have to wait six months for a takeover... I think other people will begin seeing the same thing I see, as we get closer to April of 2009... so don't wait too long before jumping on the KBR bandwagon...

Can the stock go to $13. Well, yeah... any stock can go down here... the market's that crazy. But we're starting to talk about that's basically... it's all cash.

Right now, this is a "know your fellow shareholder" situation... which is why it's been driven down...

The only reason KBR is this cheap, is because it's owned by bad guys. It was owned inordinately by hedge funds, as part of a giant oil bet that everybody knows they made that, to this day, continues to be liquidated... Hedge funds are being forced to sell KBR because of redemptions... there are brain-dead investors, that are finally getting to realize that they have been robbed, are asking for their money back.

So remember, in this environment, your co-owners are your enemies... but the redemptions for last quarter are almost done... the pressure should be abated...

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Let's talk about KBR the company, not just KBR the stock...

It's got a good mix of energy, infrastructure and government business. It's pretty steady. About two-thirds of its revenue comes from government and infrastructure projects. I know government's been cutting back. Listen, I'm not oblivious to the problems... that's why the stock's at $15, not $50!

Mostly, KBR serves the U.S. military... it's the Army's largest supplier. But it also does work for other branches of government, in and out of the U.S. That said, most of KBR's growth should come from the other third of the business, the energy side... where this company does all kinds of work from designing liquefied natural gas infrastructure to pipelines to construction services... all out-of-favor industries in the stock market, but not out-of-favor industries in the real market... the business.

KBR is the second-largest contractor for the petroleum industry, third-largest for refinery and petrochemical plants... Do you know, after all this... oil is still like in the $90s...

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If you think the stock doesn't work just because the price of oil has come down, you're dead wrong... projects are still out there, and there's still an enormous incentive to build out this infrastructure, as oil prices are significantly higher than they were in November of 2006, when KBR came public. It was a $20 stock then. Now it's at $15.

This company's been winning some big contracts lately, so it's not like it's just dormant...

It just got the Gorgan Project in Australia, a $240 million contract to engineer and design natural gas liquefaction facilities... and this one could lead to more bookings on related subjects... A $232 million contract to build a carbon plant for ADA-ES... and got a contract to license it's phenyl manufacturing technology for a Chinese chemical plant.

I'm mentioning all of these, because they're ongoing... this company's not stopping. People think that just because oil and natural gas prices have come down that the infrastructure plays should come down with them... But, as you can see, the contracts still continue to be let...

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KBR trades... alright, this is really incredible... I mean, when I saw this, I said it's got to be a typo... KBR trades at just 7.5x forward earnings... literally half of what most stocks trade at...

But this is even more important... when you back out the cash, it trades at 3x earnings... 3x earnings. I have never seen a company this cheap, on a price-to-earnings multiple basis in all my life...

3x earnings... It's peers have multiples in the low teens... some like AECOM (ACM) trade at 14x earnings...

If KBR doubles, its price would still be in line with its peers...

This is the market undervaluing this stock because of the shareholders leaving, and because of an expectation of a huge democratic win in November, which I am telling you will not hurt KBR... partially because of the "Cheney hate discount" and largely because of forced selling by hedge funds.

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Here's the big question...

If the takeover comes, what would it cost?...

Washington Group - a similar company - got taken over last year for 0.5 times its enterprise value... which is one way you can value these infrastructure companies... the ratio of enterprise value to backlog.

Now, see, if KBR got the price of the Washington Group... and you're not going to believe this alright... but they're very analogous... it would go out at $55. It's at $15. 1-5 goes to 5-5...

Even if an acquirer is only willing to pay, say, 0.3 times the ratio, we're still talking about a $33 stock... a 118% gain...

This is a $15 stock. I don't even get how that can be...

The bottom line....