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David Crosetti
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I was born and raised in California. I worked in the family business for a number of years and then decided to spread my wings and try working for someone else. My first significant job was with Frito Lay. After a stint in the salty snack business, I transitioned to the beverage industry,... More
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  • Callahan Auto Parts Offering IPO: American Made Brake Pads

    Introduction:

    In the stock market, one of the most intriguing events is when a private company takes itself public. The term used for this event is "IPO" which means, "initial public offering." This week, an automotive parts company is going to go public and this opportunity is one that you will not want to miss out on.

    Background:

    This company was founded in 1955, when returning war veteran, Thomas "Big Tom" Callahan Jr. started Callahan Auto Parts in Sandusky, Ohio. Sales have grown year over year and when the founder of the company passed away, it looked like the end had come to Callahan. The company, it seems was on the verge of bankruptcy and faced a hostile takeover fight by the senior Callahan's wife, Beverly, who was attempting to sell the company to Ray Zalinski, the self-proclaimed "King of Auto Parts."

    Issues and Opportunities:

    In order to save the company and keep Callahan Auto Parts running, Thomas "Tommy" Callahan III stepped into the breach and went on a whirlwind sales adventure to sell Callahan brake pads.

    Thomas Callahan III is a graduate of Marquette University and has been the driving force behind the company's explosive growth, along with his "right hand man" Richard Hayden who oversees the day to day operations at Callahan Auto Parts. Callahan's wife, Michelle is the President of the company.

    The turn around event in Callahan Auto Parts history came when Callahan was able to save the company when he landed a contract with Ray Zalinski, for 500,000 Callahan brake pads.

    Looking Forward:

    Callahan Auto Parts has prospered ever since and while financial information about the company is not readably available, I was able to get a look at revenue growth over the last five years.

    Callahan Auto Parts, Sandusky, Ohio:

    (click to enlarge)

    The IPO for Callahan is being underwritten by Goldman Sachs and the stock will be priced in the $20-$25 range.

    The company will trade under the ticker symbol: CAPS and will be sold on the Nasdaq exchange.

    Contact your broker today and put your money on Callahan Auto Parts tomorrow, April 1st, 2014. You won't regret your decision for a moment.

    (I have been advised that my made up symbol for Callahan Auto Parts was in fact an actual company. I regret any confusion regarding that error on my part. There is no IPO for Callahan Auto Parts. This is an April Fools joke.)

    Dave

    Mar 31 10:49 AM | Link | 27 Comments
  • Some Thoughts On Relevancy

    Recently, there have been a few articles discussing the "relevancy" of dividends. It would seem that there are a lot of people who love dividends and a lot of people who don't like dividends. Regardless of which side you line up on, or if you perhaps take a middle road, concerning dividends, the simple fact of the matter is that there are companies committed to paying dividends as part of their business model.

    Most of the companies that I've been investing in over the last 30 years are dividend paying companies. Not only do these companies in my portfolio pay dividends, but they actually increase their dividends annually.

    What I like to do is reinvest the dividends back into additional shares of the underlying company and allow my share balance to increase over time with those reinvested dividends. I even make it a practice to purchase additional shares, with new money, when those stocks in my portfolio present a value, relative to what I consider the intrinsic worth of the company to be.

    I've posted my retirement portfolio in articles on Seeking Alpha. As an active investor, I make it a practice to always be looking for "bargain" priced companies and sometimes (Heaven forbid), I will purchase stocks that do not pay dividends. I have even been known to purchase stock in companies that have a yield below 3% (of some other arbitrary yield point that others might have.)

    What I like about dividends, from the DGI perspective, is that the dividends will allow me to have a very comfortable retirement. On top of my dividend income, I will have Social Security. My Social Security income will supplement my dividend income and act as a "bonus" as opposed to being the "meat" of my retirement income. Social Security is "lagniappe" (which is something my Cajun friends refer to when you get "something extra" in your purchase.

    Now, I have to admit that a lot of the academic discussion regarding dividends is very interesting and thought provoking. I actually enjoy those articles telling me that my DGI strategy doesn't work. I enjoy being called a "zealot." I actually get a big kick out of the argument that some non-DGI folks make when they tell me that "trying to convince a DGI that he is wrong in his investment approach is an impossible task."

    In much the same way, I have to acknowledge that telling a non-DGI investor that "DGI works and here's a look at my portfolio to prove it" is also "an impossible task."

    Regardless of how you feel about it, perhaps the lack of intellectual curiosity is something that has always concerned me, to an extent. But, now, I've come to realize that what someone else thinks is just fine with me.

    At work, we have a lot of people who love to complain about things. They don't like this and they don't like that. They have a real talent for finding out "what's wrong with something," but the people that keep getting promoted are the ones who seem to come up with solutions as to how to fix those things that might be wrong.

    Interesting.

    Feb 28 2:49 PM | Link | 57 Comments
  • Things Are Only Worth What Someone Else Is Willing To Pay

    Introduction:

    I like old cars. I like to fix them up, drive them for a while and then, if the price is right, I sell them. A car that I've owned for a while is a red 1963 Corvette. It was a real project when I bought it, but with a labor of love and a lot of money, the car that was an "ugly duckling" became a "swan."

    (click to enlarge)

    As I approach retirement, to make my life a little less complicated, I've decided to sell some of my "toys." Here is a dilemma that many people in my situation have to face up to. While this particular toy was a relatively inexpensive initial purchase for me, the work to get it into its current shape was not cheap. So, putting a value on the car is somewhat difficult.

    On one hand, I could think to myself, "I have a lot of money invested in this car, so it has to sell at a price that is relative to the amount of the investment that I've made in the vehicle and some profit over and above that number, in order for me to be happy."

    On the other hand, reality rears its ugly head and it tells me, "Dave, this car is only worth what someone else is willing to pay for it." Perhaps selling the car would result in my taking a loss on my investment or at best, just breaking even on the investment made. Reality can be a real pain in the rear end.

    Some Thoughts:

    Not to long ago, Warren Buffett decided that he wanted to own the H.J. Heinz Company (HJZ). Now, this decision did not come out of the blue for Buffett. I am sure that he and his staff did a lot of investigation into the value of HJZ before he presented an offer to the company.

    How Buffett Got Involved:

    The plans to take Heinz private apparently began to take shape on a plane in early December. In an interview with CNBC, Buffett said he was approached at that time by Jorge Lemann, a fellow billionaire and a co-founder of 3G. The two had known each other since serving on the board of Gillette about 12 years ago.

    Soon after that encounter, two of 3G's managing partners traveled to Pittsburgh to have lunch with Heinz CEO William Johnson and raise the prospect of buying the 144-year-old company.

    "The offer was such that I simply felt compelled to take it to my board," Johnson said at a news conference Thursday. Over the next several weeks, Johnson said, the board worked out details of the transaction. (source: http://tinyurl.com/ool8ono)

    Did Buffett Get A Bargain?

    The company, 3G ended up purchasing HJZ for 23.3 billion dollars, which was $72.50 a share for the stock. Now, HJZ also carried some debt, which 3G decided to purchase, pushing the real number to 28 billion dollars. However, the deal was a 20% premium to where the market had priced HJZ stock the day before the announcement.

    Did Buffett get a good deal or did he overpay for the company? That's a good question. On one hand, Buffett and his partner were very excited about purchasing the company for 23.3 billion dollars, based on comments that he has made.

    On the other hand, the Heinz Board of Directors seem to have been very excited about Buffett's offer, considering that the Board unanimously approved the deal.

    In the last fiscal year of operation, Heinz had revenues of 11.65 billion dollars and earnings of 923.3 million dollars.

    But We Have A Dilemma:

    H.J. Heinz was a company that paid a dividend. To a Dividend Growth Investor, HNZ was a company that had a long history of paying dividends. It had been increasing those dividends for the last 9 years, thus earning it a place on the Dividend Challenger list.

    But there are many investors who see dividends as a practice that dilutes the value of a company. They would argue that every $1 paid in dividends, reduces the value of the company by that same amount.

    But, I think you have to look at things from a more "real world" perspective. For me, owning HNZ stock with a cost basis of $36.46 a share (having purchased the stock in 2009), the price I received of $72.50 quite a bonus for me. Additionally, the dividends I received also added to the performance of my holdings. Those were almost an additional $4000 over the holding period.

    Am I upset that Buffett did not "pay more" for Heinz? I could be, but it seems that everyone involved ended up "fat and happy." Buffett is happy, the Heinz Board of Directors is happy, and as a previous shareholder, I'm happy.

    Some Final Thoughts:

    As a DGI, I purchase stocks that are priced at a value to intrinsic worth. Now, again, one man's opinion is just that. An opinion. I like to purchase companies that have a history of paying and increasing dividends (hopefully at a rate that is greater than inflation). I like companies that have the earnings necessary to continue paying and increasing those dividends.

    My goal is simple. I am looking to create a stream of income to supplement my retirement years. I want that income to be growing every year, since I think that things will continue to become more expensive in the future.

    I've accomplished that goal with the active management of my stock portfolio, since I began doing this in 1984. Some stocks in my portfolio have performed better than others, in terms of "total returns." That's going to happen in every portfolio.

    However as a group of holdings in the portfolio, dividend income has been growing at a 6-10% annualized rate, based on the stocks held in the portfolio at any given time. Remember, being an actively managed portfolio, there are companies that come and go, based on changes to the fundamentals. It is constantly evolving and while active management might not be for everyone, I find it particularly attractive.

    About the Corvette. A couple of people came by to look her over and take her for a test drive. The good news is that she has found a new home and is being enjoyed by her new owners. The price they purchased the car for made them very happy. The price I received for the car made me very happy. In the end it would seem that everyone came away happy.

    Now, we could argue that had I put the car in an auction...............but what would be the point? It sold for what someone else thought it was worth to them.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jan 14 3:34 PM | Link | 30 Comments
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