We received 6 submissions for the contest. This is the list:
- Henry W. Schacht: Vivendi Speaks the Language of Love
- Adib Motiwala: MakeMusic (MMUS) - Niche business with free cash flow and solid balance sheet is music to my ears
- graemew: Reckitt Benckiser: large cap, defensive, high growth, multi-national consumer products company.
- Batbeer2: Making money, Is de la Rue a bargain ?
- Alex Morris: PepsiCo: Value with Safety
- Bill Smith: Boston Beer Company - A Small Brewer Buffett Would Love
Adib Motiwala’s analysis MakeMusic (MMUS) - Niche business with free cash flow and solid balance sheet is music to my ears was extremely thorough and well written. MakeMusic (MMUS) has solid balance sheet, and the valuation of the stock is also reasonable. But his pick is a small company in a niche and very competitive market, and the company does not have a moat that can protect itself for long term business success.
The analysis of Henry W. Schacht, CFA, Vivendi Speaks the Language of Love discussed French company Vivendi. “The company provides attractive exposure to media and telecom in both developed and emerging markets.” The analysis was rated 4.3-star in 15 votes. Henry digs into the numbers and evaluated the stock with “look-through earnings”. Compared with Adib’s pick, Vivendi seems to be at least similarly undervalued. But the company’s business has multiple recognized brand names, which build moat from competition. Vivendi has good management team, and the dividend yield is at 7%.
Bill Smith’s Boston Beer Company - A Small Brewer Buffett Would Love is extremely well written. Our readers appreciated his deep and thorough analysis. Boston Beer Company is a company with very predictable double digit growth. The business is extremely profitable, and the products have recognized brand names among consumers. The only problem is that Boston Beer Company stock prices may be a little overvalued. Bill Smith’s research arrived at a fair value of $83, while the stock is traded at $91 a share. Bill’s own cost is below $50 a share.
Alex Morris presented his case with PepsiCo: PepsiCo: Value with Safety. The company certainly has capable management. It grows very consistently, domestically and internationally. He expects an average return of 10-12% for the coming years.
Graemew’s analysis Reckitt Benckiser: large cap, defensive, high growth, multi-national consumer products company presented a mutli-national company based in UK. It is not well known among US investors, although it is the equivalent of Procter & Gamble (PG) for UK. The company has little debt and faster growth. At 17.8 times 2009 earnings, the company does not look very cheap. But it is lower than the valuation of P&G.
Batbeer2’s submission of Making money, Is de la Rue a bargain ? presents a company that is in the business of printing money. The business has very high barrier of entry. The stock is cheap because the business has some setbacks lately. The company is at least 40% undervalued, according to Batbeer2’s research. The management might not be stable as the company changed CEO lately. Batbeer2 does not own the shares.
The rating of to the submissions are rated in multiple aspects. They are listed in the following table:
| Analyst|| Company (Symbol)|| Business Quality|| Financial Strength|| Proven Management Capability|| Undervalued?|| Presentation|| Readers' Rating and Comments|| Total|
|Henry W. Schacht, CFA||Vivendi (VIVHY)||4||3||4||4||3||4||22|
|Adib Motiwala||Make Music Inc. (MMUS)||2||5||2||5||4||2||20|
|graemew||Reckitt Benckiser (RBGPY)||5||5||1||4||2||3||20|
|Batbeer2||de la Rue (DLUEY.PK)||4||3||3||4||4||4||22|
|Alex Morris||PepsiCo (PEP)||5||4||5||3||3||5||25|
|Bill Smith||Boston Beer (SAM)||5||5||5||1||5||3||24|
How to Get a Higher Score?
Two factors are considered for the scores. The quality of the analysis itself and the quality of the area that is analyzed. An example here, if the company has very good management, AND you prove clearly with your analysis, you get higher rating. If the company does have good management, but you fail to convince the readers, you still get low points.
Therefore, the first place of the contest goes to PepsiCo: Value with Safety by Alex Morris; the second place goes to Boston Beer Company - A Small Brewer Buffett Would Love by Bill Smith!
Congratulations, Alex and Bill!
With this announcement, we also open our March Value Idea Contest. To encourage submissions, we increase the payment to each qualified submission to $50. The first place will win $500, and the second place will win $200.
Submit your value ideas now!