Old School Value

Living in an apartment in Seattle doesn’t offer much opportunity to grow your own small plants or herbs. The endless cloudy days and the small square footage doesn’t help the cause either. I don’t like gardening and planting but I do want to be able to eat (if possible organic) fresh salads, herbs and other vegetation without having to visit the grocery store so often. So I’ve recently become greatly interested by Aerogrow, a company that has a product line that seems to solve the dilemma for people like myself.

The major news today is of Mars Inc buying Wrigley’s for $23 billion. A 28% premium over Friday’s close. Wrigley’s basically owns the chewing gum market with 50% market share in the US as well as a strong presence internationally. Because of its gigantic moat and simple to understand business, it has been one of Buffett’s often used examples in speeches. No wonder he doesn’t mind putting up $6.3 billion in cash to help finance the deal for a minor stake in the company.

Had you bought FSLR at $165 when the market dropped to around 11,800 points in March, you would be up about 60+ % in the space of a month. Whenever I see such a rise, I kick myself for not jumping on it myself. Don’t you? But then I look at what the price represents and what the price is relative to and I’m glad I didn’t. To be honest who wouldn’t want a piece of that 60% gain, but I’m glad I’m watching this one from the side. No matter how thrilling the ride may be, there is just no way that I see First Solar as a good investment at its current price.

Value stock or value trap? K-Swiss, a simple, easy to understand business which is probably within everybody’s circle of competence. K-Swiss operates in the athletic footwear business designing and marketing mainly tennis and casual shoes to the teen market. Currently down to the $16’s, how is it as an investment?

Recently I had an interesting discussion regarding dual class share structures and how it impacts a company’s fundamentals and valuation. Now if a company had a dual class structure where they offered only class A shares to the public, the investing public who buys a stake in the business will only be entitled to a single vote compared to maybe 10 votes for a class B stock. In the case of Berkshire Hathaway, class B holders have 1/200th the voting power of class A shareholders.

In continuation from the arbitrage post, here I will give an example of a current pending merger with a price spread of 21% annualised to 178%. With the economy in a recession and things not looking to brighten up anytime soon, studying and practicing anti-recession techniques may be one of the few things that saves you.

Seems like the current pull back clipped the wings of American Eagle. At its current price of $17.17 is it a superb deal or a value trap?

So a lot of people have been complaining that I was too conservative with my first valuation of AAPL. I assumed that AAPL would grow at 14.3% for the first 3 years, slowed down 10% in yrs 4-7 and further slowed down 10% in yrs 8-10 until the company slowed down to a steady 5% from yrs 10-20.

As you probably know Apple is a leader in consumer electronics. If you’ve never heard of the iPod, it’s time to crawl out of the cave you’ve been living in.