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Jeremy Johnson, CFA

 
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  • Mondelez's Sugary Valuation Could Cause Wealth Decay [View article]
    It's not undervalued. Good business at a fair price, that is all. Expected returns 6% nominal under current inflation.

    Kraft split had to be done to ameliorate post retirement benefits and Wal-Mart / other top 5 grocers exposure but the dis-synergies will hurt a lot.

    Over short-term coffee / cocoa pricing going down will hurt revenues but stimulate demand and either help profit or at least help keep it stable.

    Lastly, these businesses are not really very high return and everyone should realize this. Using book capital, it may look like it, but these firms have decades of marketing dollars spent to achieve their current "brand equity" and there is steady inflation in what it costs to get your message out.
    Feb 15 01:21 PM | 2 Likes Like |Link to Comment
  • Why Hyperinflation Is A Myth (And What It Means For Gold Prices) [View article]
    Hyperinflation is always and everywhere a political decision. In Zimbabwe it was used as a tool to transfer wealth from the remaining white elites. In Germany it was a form of nonviolent protest against reparations. In neither case was economics important. If there is ever a hyperinflation in America, it will be to achieve a political purpose. And not just to change the guard from red to blue or back again -- it would be something of a scope far greater, on the scale of a major war.
    Feb 12 07:20 PM | Likes Like |Link to Comment
  • Three Dell (DELL +0.7%) investors owning a combined 3.3% of the company - Harris Associates, Yacktman Asset Management, and Pzena Investment Managment - have joined Southeastern Asset Management (8.5% stake) in opposing the Dell LBO, Reuters reports. Dell ticked higher to $13.63 today, putting it within a hair's breadth of its $13.65/share LBO price. For now at least, the LBO consortium isn't budging[View news story]
    In my opinion it is virtually guaranteed that the price will rise. Your risk is that the deal gets blocked by the government due to MSFTs involvement. That is why it is not trading over $14.00, in my view.
    Feb 8 08:04 PM | 2 Likes Like |Link to Comment
  • Dell Goes Private: Saving It From Market 'Short-Termism' Or Smart Tax Strategy? [View article]
    My guess is the new term loans will have some covenants on dividends because while there is a lot of cash, there is also a lot of preexisting debt. The deal would not make sense to the lending syndicate if it were valued on a cash free basis. Also some of that cash is going to buyout public shareholders already I believe.
    Feb 7 07:39 PM | 1 Like Like |Link to Comment
  • How Much Of A Premium Will Dell Deliver? [View article]
    I bet they can get a fairness opinion at $13.50 to $14.00 so that is all they need. 25-30% premium to 200 day moving average.

    Comps trading at low multiples is a help as well.
    Feb 4 04:01 PM | 1 Like Like |Link to Comment
  • Dell (DELL -2.4%) is "very, very close" to striking a $13.50/share LBO deal, David Faber reports - he thinks an announcement could come tomorrow, and that Microsoft (MSFT -0.5%) will put in $2B. Dell shares have slumped to $13.30 following the WSJ's report of a $13-$14/share deal price. Update (12:34PM ET): The WSJ now reports the price is likely to be in the $13.50-$13.75/share range. Microsoft is expected to invest ~$2B, Silver Lake over $1B, and Michael Dell's P-E firm ~$700M. [View news story]
    About $6.
    Feb 4 02:51 PM | Likes Like |Link to Comment
  • Cheap Valuation Makes Molson Coors Worth A Look [View article]
    No, they will probably pay down a little debt on the StarBev deal before returning more capital to shareholders. The payout ratio is about 35% which isn't bad and they buy back shares from time to time. I personally would prefer they not increase the payout ratio much and continue to invest in the business.
    Feb 4 11:30 AM | Likes Like |Link to Comment
  • Cheap Valuation Makes Molson Coors Worth A Look [View article]
    They are all very pricey. I would consider Tsingtao (168:HK) if you want a flyer.
    Feb 1 11:14 AM | 1 Like Like |Link to Comment
  • Cheap Valuation Makes Molson Coors Worth A Look [View article]
    In a way I think the big brewers are more concerned with wine and liquor then craft beers. Craft beers are drank for taste and variety whereas light beer is more of an everyday drink, something more akin to a soda for nights and weekends. The volume issues for beer come I think partly from young people moving toward other drinks such as mixed. Craft is probably more responsible for growing the market then getting people to move from drinking Budweiser to some obscure microbrew -- I just don't see that move happen that often.

    Imports are a different matter and I think it just comes down to taste. You have three big beers in the U.S. and they taste somewhat similar so when the imports came in it was something new and that continues. Today we have the Inbev news and it shows how much a threat these are. In my local store in California, there is as much or more Heineken and Corona then Budweiser or Coors Light (and far more than Miller Lite). Nationally, Coors Lights is doing pretty well so that brand is not a huge issue, but Miller Lite is struggling. I think SABMiller was either extremely shrewd or very lucky to JV that brand because I can see it losing share continually, but Coors should take up some of that slack.

    The company is very very strong in Canada which is a good market. It is strong in the U.K. which hurting on a marketwide basis but their brand is doing okay. Central / Eastern Europe isn't a bad business but they paid a lot for it so it needs to perform.

    I think MolsonCoors has plenty of scale in the markets it participates in.
    Jan 31 08:06 PM | 1 Like Like |Link to Comment
  • Cheap Valuation Makes Molson Coors Worth A Look [View article]
    A little expensive compared to history.

    Depends on whether you have to be invested or not. If I run a long-only fund then it is my client's decision whether they want equity exposure or not. You just pick the best ones.

    Also, discount rates used to calculate fair value are based on history and there is a good argument that capital will have lower returns today than it did 30 years ago. Using historical discount rates, you would be hard pressed to find a stock today that appeared cheap using reasonable assumptions about the future of the business (Dell may look cheap, but there are many reasons to believe current free cash flows cannot be sustained or really don't exist in the first place because they all go to acquisitions that don't end up growing the business over the long-term).
    Jan 30 04:56 PM | 1 Like Like |Link to Comment
  • Frustrating F5 Networks Zigs And Zags Again [View article]
    I hope all their engineers eat lots of Oreo's. Long Mondelez. :)

    In all seriousness, tech is tough, too much can change too quickly.
    Jan 24 05:32 PM | 1 Like Like |Link to Comment
  • HP Could Be A Hidden Beneficiary Of Yen Devaluation [View article]
    http://bit.ly/W74IaQ
    Jan 16 11:14 AM | Likes Like |Link to Comment
  • HP Could Be A Hidden Beneficiary Of Yen Devaluation [View article]
    The yen was a little weaker in 06-07, but it is basically stronger than at any time since the Plaza Accord.

    The "platform" of the LDP in an election is not important and I don't regard a stimulus program as being non-conservative. Perhaps non-libertarian, but that is a political philosophy with no currency. The LDP's goal is to protect the established order -- giving money to construction companies fits within that framework.
    Jan 15 06:59 PM | Likes Like |Link to Comment
  • HP Could Be A Hidden Beneficiary Of Yen Devaluation [View article]
    1) The yen is not strong right now, not even close. You are just seeing the impact of 20 years of no inflation. A stamp in Japan costs the same as it did 20 years ago. Imagine a stamp in the U.S. costing 25 cents? This is the concept of real effective exchange rates.

    2) Japan needs a strong yen. The old guard companies of Sharp, Sony, etc are not coming back even with a marginally cheaper yen. Japan is luxury / consumer economy and people want a strong yen.

    3) The LDP is only interested in a weak currency to juice the stock market short-term to A) win the upper house in June; B) have a weak mark-to-market on Japan's fiscal year end in March.

    4) The BoJ has been the most aggressive central bank for in the world for two decades, there is no change there. If you think one of the most conservative political parties in the world will nominate a reflationist BoJ governor, I think you are mistaken.

    5) Abe will restart Japan's nuclear industry, this will help the trade deficit.
    Jan 15 12:28 PM | 1 Like Like |Link to Comment
  • HP Could Be A Hidden Beneficiary Of Yen Devaluation [View article]
    JPY will be back at 80 in six months.
    Jan 14 07:01 PM | Likes Like |Link to Comment
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