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February Value Idea Contest Results Announcement

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gurufocus

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In February GuruFocus hosted its first Value Idea Contest. This is the announcement of the winners.

We received 6 submissions for the contest. This is the list:




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!

contest winner31_avatar_big.jpg


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!

About the author:

gurufocus
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 3.7/5 (15 votes)

Comments

hschacht
Hschacht - 3 years ago
So the key to the contest is to write about a beverage company.
Adib Motiwala
Adib Motiwala - 3 years ago
Congrats to the winners.

However, its interesting to see the valuation for the winning entries was not deemed as cheap....Also you cannot really compare a nano cap with a 100 year old company that has a brand name and stable business...
Lothario
Lothario premium member - 3 years ago
All articles written were very excellent, especially the ones that won. They were very detailed which is much better than the typical "Street Authority" articles I see here every now and then.

I commend the people who participated, it takes a lot of research and effort to do it.

However, I wouldn't regard the companies that won as being "cheap".

Maybe instead of calling it a "value" idea contest, it can be called something else? or can you use a formula which takes "value" more into account such as maybe using a 10 point scale for that and 5 for everything else?
slkiel
Slkiel - 3 years ago
Congratulations Alex and Bill! Great job to everyone who submitted an article. I enjoyed reading each one of them.
hschacht
Hschacht - 3 years ago
Hey, guys, I'm gonna stake a claim to DPS for March... and KO for April... TAP for May... etc.

Just kidding. Read my DPS stuff on www.lonelyvalue.com. And KO is no bargain.

Happy investing to all.
Adib Motiwala
Adib Motiwala - 3 years ago
I guess given that a lot of gurus own or may even be buying PEP and KO, they are considered a value stocks. However, I would have given some additional weight to how undervalued they are, the size of the company, the novelty/ unheard idea.
Alex Morris
Alex Morris - 3 years ago
Henry,

I was going to say after your first comment, "I've got DPS!" (I know how you love your Dr. Pepper/Snapple Group...)

Thanks for the kind comments above; enjoyed reading all the articles as well.

$50 per submission for March ideas? Sounds good to me!
Alex Morris
Alex Morris - 3 years ago
Henry,

I was going to say after your first comment, "I've got DPS!" (I know how you love your Dr. Pepper/Snapple Group...)

Thanks for the kind comments above; enjoyed reading all the articles as well.

$50 per submission for March ideas? Sounds good to me!
hschacht
Hschacht - 3 years ago
Ha ha. No worries, Alex... DPS is yours. I will not be submitting ideas for the contest in the future.

Don't everybody trip over each other claiming the other beverage makers.

Kudos to all those who wrote articles, especially those who went off the beaten path... especially Adib and Batbeer.

I'll make up for my loss by collecting my Vivendi dividends... this year's dividend (payable in May?) is going to be 1.40 euros.... 6.6% yield.

And I got a 3 for financial strength?

Wonders never cease. Win, lose, or draw - buy Vivendi.
kfh227
Kfh227 premium member - 3 years ago
Regarding value investing, it is not always important to write articles about undervalued companies. If you spend alot of time reading about a company a write up is a good way to organize your thoughts. Even if it is not cheap. This is one of the reasons that Buffett likes to do his annual shareholder letter. He has alot on his mind and that annual letter is his way of getting all of his thoughts organized. These articles serve that purpose to an extent.

Finding a wonderful company is important. If it is overvalued now, it might not be in 3 months time. So it is important to find out about them now regardless of current quotation.
gurufocus
Gurufocus premium member - 3 years ago
I am sure that our judgment is not completely fair, and in some cases it was hard to make the judgment. Please do not take it personal. You may well have the case but we did not understand well.

In general, we look for high quality companies that are fair or undervalued. The presentation itself is very important too so that readers can understand better.

We understand almost everyone will think his pick is the best. But we can only pick two winners. The ones who did not win will have chance to win next. Better yet, as pointed out by Henry and in our first announcement, the reward from owning your best pick is much bigger.

Everyone has the chance to win, and we did increase to $50 for each qualified submission.

Thanks!

GuruFocus.
Adib Motiwala
Adib Motiwala - 3 years ago
Well Said kfh227. I agree that writing about ideas makes you think better about them and even if they are not cheap at the moment, they may become cheap in the future. So, the work done is certainly worth it.

Henry, thank you for the kind words. I appreciate it.

Gurufocus, if you are looking at high quality companies that are fairly valued, then it does not make sense to submit most of these small nano caps. I mean no matter how good their FCF and balance sheet are, they can never be as high quality as the large caps. Their management may not be in place for long enough either. So, maybe in a given month you should call for Large cap only entries. In the next month, you can call for Small Caps/ Mid Caps. And in the next, may be keep it to companies under $100 million. I am sure many folks here invest in pink sheets and would be able to write up strong pitches.

Bill Smith
Bill Smith premium member - 3 years ago
Congrats, Alex! And thank for the kind words, all.

v/r

Bill

Alex Morris
Alex Morris - 3 years ago
Thanks Bill, same to you!
batbeer2
Batbeer2 premium member - 3 years ago
@ Alex & Bill

Congratulations ! Better get to work though, this month I'll really be trying ;-)

@ Henry, Adib & Graemew

Like kfh227 says, they're probably worth writing. In any case, they were worth reading, thanks !
yswolinsky
Yswolinsky - 3 years ago
Congrads to the winners and everyone who did not win. All the write ups included were great. Please submit my article for March competition-_http://www.gurufocus.com/news.php?id=123999
graemew
Graemew - 3 years ago
Congratulations to the winners. I will contribute again in the future. However I would say that your assessment of the management of Reckitt Benckiser as 1 out of 5 is completely wrong. They have one of the best managed consumer companies in the world, as shown by the company´s outstanding and consistent record over the last ten years. I don´t think I deserved to win, since my presentation was quite brief and didn´t go into as much depth as the winners. However by rating management as 1 looks to me that you just decided to downgrade my idea without taking the time to look at Reckitt Benckiser. In addition, since the latest earnings figures came out (before the contest was assessed), RB is now trading at around 15 times 2010 earnings. In my next submission I will present a company which will be of more interest to US based investors.
gurufocus
Gurufocus premium member - 3 years ago
Graemew,

We are not saying the management is poor. We are just rating your analysis of the management. You did not discuss the management in the analysis, that is why.
graemew
Graemew - 3 years ago
Sorry...I agree completely that I didn´t analyse management...I will improve on this next time. Thanks for clarifying this for me.
Adib Motiwala
Adib Motiwala - 3 years ago
GuruFocus,

Maybe a bit more clarity around the scoring system would be good....Now that we know that there are 6 buckets of grading...

gurufocus
Gurufocus premium member - 3 years ago
Updated:

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.

Please leave your comment:


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