Written by
Jae Jun
I’m always after quality links and lately there has been a burst of them. Here are the ones I found to be excellent and helpful. None talk about the market or Europe thank goodness. A few spinoff analysis posts in this one. Enjoy it over the weekend or whenever you have time.
It was the most advanced consumer product of the century. The industry started with its innovators located in different cities over a wide region. But within 20 years it would be concentrated in a single entrepreneurial startup cluster. At first it was a craft business, then it was driven by relentless technology innovation and then a price war as economies of scale drove efficiencies in production. When the market was finally saturated the industry reinvented itself again – one company discovered how to turn commodity products into “needs.”
I first mentioned Gravity, a Korean developer, licensor and publisher of on-line games, last December (2010). At that time I had, over the prior 6 months, accumulated a small position based on a simple thesis: the company had over $1.90 in cash on its balance sheet, was operating on a cash flow positive basis, had no debt and I could buy shares at about $1.58 or 83% of cash. In retrospect my post was a bit flippant. There were some negatives about the company that I didn’t fully analyze. The most important, of course, was the majority ownership by GungHo Entertainment (a Japanese entity controlled by SoftBank). I say ‘negative’ because with a majority shareholder there is little or no possibility that an activist investor can influence management to adopt a more shareholder-friendly capital allocation stance. Furthermore, GungHo is a Japanese company and the most important licensee of Gravity’s primary on-line game, Ragnarok, so there are potential conflicts of interest at every twist and turn.
Value Investing Congress notes and summaries with the actual slideshow presentations and/or in-depth notes from each speaker. We’ve also posted up links for day 2’s speakers.
Whitney Tilson was very public about his short position in Netflix (NFLX). Come to think of it, is there anything that Tilson isn’t public about? Don’t get me wrong, I’ve always enjoyed his presentations, particularly when they agree with my investment stance. We all like validation.
Those of you who have read Joel Greenblatt’s book “You can be a stock market genius” will remember his case study on Host Marriott/Marriott International. (.. and those who haven’t, should!). Well, Marriott’s doing it again. Last February they announced that they would be spinning off their timeshare business, Marriott Vacations Worldwide, from Marriott International by the end of 2011. The first Form 10 for the spinoff was filed in June, and now we are on edition 3 (Sept. 30, 2011), so the spinoff looks likely to be finalized before year-end.
The reason that TNT Express was spun off was that Express and PostNL had grown into two different businesses, one struggling with growth, the other decline. The directors realized this and split the companies, as the company itself states Express is now a growth stock and PostNL a value stock. PostNL has been hit by selling due to European fears, in addition they’ve been hit with selling as investors dump their shares in a seemingly dead or declining business.
While speaking at a recent Barclay’s Energy Conference, ConocoPhillips (COP) CEO Jim Mulva provided an update on the company’s broad strategic repositioning plan including some additional details on its upcoming spinoff.
The plan is to create a pure-play E&P company (retaining the Conoco name) along with a new downstream company. The spinoff company will also include COP’s chemical JV (with Chevron) and midstream JVs in an attempt to make it more ‘integrated’.
We find evidence that industry and size adjusted CEO pay is negatively related to future shareholder wealth changes for periods up to five years after sorting on pay. For example, firms that pay their CEOs in the top ten percent of pay earn negative abnormal returns over the next five years of approximately -13%. The effect is stronger for CEOs who receive higher incentive pay relative to their peers. Our results are consistent with high-pay induced CEO overconfidence and investor overreaction towards firms with high paid CEOs.
