In March GuruFocus hosted its first Value Idea Contest. This is the announcement of the winners.
We received 11 submissions for the March contest. This is the list:
|Microsoft: Quality Tech Stock on Sale||Victor Riesco||MSFT|
|Small Pharma Big Value - HI-tech Pharmacal||bjm1625||HITK|
|March Value Idea Contest: Berkshire Hathaway||Alex Morris||BRK.A|
|Dolby Labs: The Kings of Immersive Audio Selling at a Discount||Bill Smith||DLB|
|Coinstar: Deep Value and Exceptional Growth||afardshi||CSTR|
|Full House Resorts: An Underfollowed Small Cap with Strong Earnings and a Low Valuation||Frogs Kiss||FLL|
|Wendy's/Arby's: Business Analysis & Valuation||Rishi Gosalia||WEN|
|IDT Corporation - Lots of Hidden Gems||Mariusz Skonieczny||IDT|
|Medtronic Inc (MDT): two strong drivers of future growth.||graemew||MDT|
|Markel Corp (MKL) - Conservative Value||Toddius||MKL|
|Interval Leisure: An Undervalued Stock with a Catalyst||Jacob Wolinsky||IIIG|
These are the comments from our judges:
Argued that the products are hard to replace. The growth potential is higher than people thought. But did not address management skills. The risk of the assumptions of future growth. The valuation part can be deeper. What about massive insider selling? Huge options grants? Etc.
Author did not explain why in the years from 2007 to 2008 the profit margin declined significantly. What is the risk for this to happen again? More questions to be answered: Been a fast grower in the past, what caused this growth? Is it sustainable? For 9x forward earnings, how about JNJ, MRK, ABT, PFE? They will all be around tomorrow, they are underleveraged, and pay HUGE dividends.
Overall it is a good work. Berkshire is a complicated business. The article is very qualitative. The valuation needs more analysis to back up. David Sokol's fall may indicate that the managers are not as good as bragged by Buffett.
An excellent analysis. A lot of hard work was done during the research. As pointed by the author, it is a right company, but the price is not. The only holdback is the price. The stock is not cheap enough so the author does not own it either.
The author explained the business well and lays out a lot of the key variables. Long-term decline of gross margins, why? On short term the profit margin may recover, but on long term, it is in the trend of declining. No discussion of the management team skills. The financial strength of the company was not addressed either. Question: Are buybacks real or just to offset options? Valuation work is extensive, the conclusion is not obvious.
A micro-cap value idea. More background of the business will help readers to understand more and build more confidence. Questions need to be answered: Who is going to buy this company? Who is the other 50% owner? Could they buy the whole thing? Etc. Overall, the analysis should be organized so that readers can read more easily and understand better.
A turnaround by new management, expansion of margins at Wendy's. New strategies at Arby's. The question is if it is too early? Plan to sell Arby's and focus on Wendy's. The analyst did not address the financial strength of the company and the risks with the implementation of the strategies. What are the possibilities of the success of the strategies? Many ideas need to be tested and questions to be answered. The business is underperforming McDonald's, why is McDonald's not a better investment? Overall the author did a lot of good work.
Turnaround by original CEO. Sum of each part is much higher than the combined company. The spin-off seems to serve well as the catalyst. The new management was the old CEO, but his new turnaround plan is yet to be proved. Very deep analysis and overall very convincing.
This may be a good idea but the analysis can go deeper if the valuation can do deeper than just PE ratio. How is the quality of earnings? Contributions from different segament or products, geographic areas and the risk with each of them? How MDC is better than the competitions? Digging out the details will answer more questions from the readers and help readers to build confidence.
The analysis can go deeper with discussing different segments and geographic areas of the business, their quality and valuations. The valuation will be better if all the parts are discussed instead of just talking about the book value, especially the company have many subsidiaries and an investment portfolio. The financial strength was not discussed. Comparison with the competitions will improve the quality too.
Jacob tells an nice story of IIIG business. The management looks capable and the company is the process of paying down its debt. Some of the numbers and calculations need to be corrected. The comparision with competitors will improve overall quality. The presentation needs to be improved. This is a tough business and more discussion on the risks will be appreciated.
These are the overall ratings:
| The ratings here are from the analyses. They do not necessarily reflect the real situation. |
If not discussed, the rating is 0.
|Analyst||Company (Symbol)||Business Quality||Financial Strength||Proven Management Capability||Undervalued?||Presentation||Readers' Rating and Comments||Total|
Therefore the winners are:
Please contact us to claim your prizes. Other participants, if your submission was exclusive to GuruFocus, please contact us to claim your $50 award for the submissions. We pay by check or PayPal. If you have not done so, a Freelance Agreement needs to be signed, scanned and emailed to firstname.lastname@example.org. You can download it here.
With this announcement, we also open our April Value Idea Contest. The payment to each qualified submission to $50. The first place will win $500, and the second place will win $200.
For April, we will put double weighting on the valuation. The valuation score will include both the depth of the valuation and the under-valuations.
Submit your value ideas now!