When you ask CEOs about their stock, they usually drone on about how they focus on the business and don't worry about the stock, blah, blah, blah -- it's just so much nonsense. CEOs are acutely aware of their stock and closely gauge many decisions based solely on its price. For example, many mergers are attempted (or not) simply on the state of the currency at hand -- namely, the stock price.

When times are exceptionally good, and the stock price is unduly inflated, how should a CEO react? Consider two companies, from the biotech and Internet industries: Millennium Pharmaceuticals (MLNM:Nasdaq - news - boards) and Amazon.com (AMZN:Nasdaq - news - boards). Both companies saw their stock enjoy a parabolic rise in the late 1990s only to decline precipitously coincident with the decline in the Nasdaq.

When the market was near its peak, Mark Levin, CEO of Millennium, had the good judgment to sell lots of stock to raise a ton of cash and pay down debt. Diluting the share base by selling stock is not going to make a CEO popular with shareholders. But a CEO needs to structure his or her company for the long term, even if that means making moves that are temporarily unpopular.

Much of the $1.5 billion cash hoard that Millennium currently enjoys was accumulated when Levin sold stock during the heady days of the Nasdaq bubble, with most of the selling near the peak stock price.

Amazon CEO Jeff Bezos had the same opportunity as Levin. By any reasonable measure, the stock of Amazon.com was insanely inflated, even if you agreed with the most optimistic forecast. But Bezos did not take advantage of the share price (for whatever reason -- hubris or overconfidence in the company, pressure from shareholders -- it's hard to say what he was thinking at the time). Instead of selling some stock, Bezos saddled Amazon with $2 billion in debt when he could have built up cash and paid off debt.

A lot of attention is paid to CEOs in times of struggle, but you can learn just as much, if not more, by observing their actions during times of bounty, when business is humming and all is right in the business world.

York International

One of the leading heating, ventilation, air conditioning and refrigeration companies, York International (YRK:NYSE - news - boards), is not a widely followed stock, despite generating a hefty $4 billion in sales. But this is the kind of company I like to buy, when cost-cutting and efficiency moves are being implemented to boost margins and earnings, when the strongest part of the cycle is dead ahead, and, most of all, when no one seems to be paying attention.

Cool Earnings York International is undervalued.

I like York because its current stock quote of about $30.50 represents a large discount to the underlying value of the company. With the company expecting per-share earnings in this tough year to come in between $3.25 and $3.50, the potential for capital appreciation is obvious if business conditions improve. Expect at least a 50% gain by sometime next year, as this solid company should trade in excess of $46, which is 12 times my 2002 earnings estimate of $3.85 per share.