Ralcorp Spin-Off Could Post Big Gains [View article]
Great discussion on a spin off company! In the academic research you sited, the researchers also noticed that most of the out-performance in spin offs occur in year two. This is so because there is often forced selling at the beginning, as you mentioned, and because management will get its options priced sometime in the coming year. After the option pricing, management will really start to pub the company and make the financials as pretty as possible. Speaking of forced sell offs, do you know if Ralcorp is in an index that Post isn't included in? The reason I ask is that if a bunch of funds track an index with Ralcorp but not Post then all of those funds will be forced to sell.
My first instinct would be to say a company is cheap if it trades below their book value ($55 billion) but the company clearly has some competitive advantage because its ROE is almost 50%. Seeing as its partially a mining company, I would see at what percent discount (or premium) its trading to its proven reserves. I would use the previous stated metric to measure the margin of safety because if the company ever falls on hard times, the reserves could be sold to make the equity investors whole. A magnificent book concerning this subject is "Margin of Safety" by Seth Klarman http://amzn.to/zvsX8N. This being said, your article was very informative and the stock looks to be attractively valued.
Another GGP Spin-Off: Rouse Properties Seems Undervalued [View article]
I love spin offs and would probably wait a few months to buy. Let the owners of the spin off stock sell there position. Also management will be granted stock options in a few months and that's when management will rev up their promotion of the company. Great article.
Lexmark: Strong Free Cash Flow Being Returned To Shareholders [View article]
Free cash flow will start to fall off due to decreasing outstanding printer units. Also note that most of the short term investment securities are held abroad and would take be subject to taxes if repatriated. It's still a moderately attractive value proposition.
OfficeMax: Reward Justifies Any Risk [View article]
Good analysis. Also note that OMX has operating leases total $1B. If they choose to close stores, they could be on the hook for that amount which could drastically decrease BV of owner's equity.
Why Lexmark Is Undervalued On A Variety Of Metrics [View article]
About 2/3 of the cash and marketable securities are overseas which would decrease the chance of an LBO. You even mention in your article it is a razor and razor blade company. Why didn't you do an installed units valuation?
Lexmark Makes For An Attractive Acquisition On Fundamental Value [View article]
Bankdividends.com Thank you for your comment. I do agree with you that this article doesn't demonstrate a margin of safety or a price target at which one exists. This article was my first attempt at valuing and pitching a company. Over the past few months, I have heard some great investors speak in a class of mine, and I came to recognize the importance of a margin of safety in investing. I went back an reexamined Lexmark with this thought in mind. Its net cash and short term investment position and supply sales from existing installed units would yield a share price of roughly $21 a share. They're tangible book value per share is closer to $15. With these two price points and my valuation estimate in mind, I would consider Lexmark a good value at the $26. More questions or comments would be greatly appreciated.
Sealed Air Has Significant Valuation Upside [View article]
Ralcorp Spin-Off Could Post Big Gains [View article]
Ralcorp Spin-Off Could Post Big Gains [View article]
Why I Chose BHP Billiton Over Vale [View article]
This being said, your article was very informative and the stock looks to be attractively valued.
Why I Chose BHP Billiton Over Vale [View article]
Another GGP Spin-Off: Rouse Properties Seems Undervalued [View article]
Another GGP Spin-Off: Rouse Properties Seems Undervalued [View article]
Lexmark: Strong Free Cash Flow Being Returned To Shareholders [View article]
Apple Just Made The Street's 2012 And 2013 EPS Estimates Obsolete [View article]
21 Stocks With High Piotroski Scores [View article]
OfficeMax: Reward Justifies Any Risk [View article]
Why Lexmark Is Undervalued On A Variety Of Metrics [View article]
Why Walmart And Target Are Worth Around $70 Apiece [View article]
Lexmark Makes For An Attractive Acquisition On Fundamental Value [View article]
Thank you for your comment. I do agree with you that this article doesn't demonstrate a margin of safety or a price target at which one exists. This article was my first attempt at valuing and pitching a company. Over the past few months, I have heard some great investors speak in a class of mine, and I came to recognize the importance of a margin of safety in investing. I went back an reexamined Lexmark with this thought in mind. Its net cash and short term investment position and supply sales from existing installed units would yield a share price of roughly $21 a share. They're tangible book value per share is closer to $15. With these two price points and my valuation estimate in mind, I would consider Lexmark a good value at the $26. More questions or comments would be greatly appreciated.
Darden Restaurants Offers An Opportunity For Long-Term Investors [View article]