Andrew Kuhn October 9, 2017 Premium Articles-01, Stock Ideas

A Few Thoughts on Hostess Brands

“Your premium brand had better be delivering something special, or it’s not going to get the business” -Warren Buffett For the past few weeks I have been studying and doing research on Hostess Brands, the maker of the classic chocolate cupcake with the squiggly white frosting line and of course the iconic, golden, cream-filled Twinkie. At first glance, the company passed almost all my filters on my investment checklist for a company I would want to be involved with. They claim to have a 90%...

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Andrew Kuhn October 3, 2017 Mental Models

Psychological Tendencies to Guard Against In Investing

“The first principle is that you must not fool yourself and you are the easiest person to fool” -Richard Feynman   Do Something Bias, Social Proof and Confirmation Bias… Let’s walk through a theoretical situation where these three powerful Biases can destroy someone in the field of investing: A new Investment Manager named Benjamin just signed-on a new client for his investment firm and is very excited about it. The new client, let’s call him “Thomas”, rolled over his IRA account of $500,000 and assured...

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Kevin Wilde September 27, 2017 Idea Exchange

Hamilton Beach Brands (NYSE:HBB) – Quick Valuation

I took a quick look at Hamilton Beach Brands after reading about it in some of Geoff’s articles.  In the 10-K, the company segments profits by NACoal, KC, NACCO & Other, and HBB.  So, I’m talking about HBB here and I’m just crunching numbers without doing any sort of qualitative analysis. 5Y median Return on Tangible Capital ~23%. HBB Revenue ~$600MM. 5Y median revenue growth 3.8%, so estimate 3-4% moving forward. 5Y median operating margin ~7%. Normalized operating profit ~$42MM. 5Y median CFFO / operating...

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Andrew Kuhn September 20, 2017 Premium Articles-01

Warren Buffett’s Partnership Letters and My Investing Thought Process

“You can’t predict. You can Prepare.” -Howard Marks I have been reading all of Warren Buffett’s old partnership letters the past week or so. These letters are the letters he wrote to his Investors yearly (and then semi-annually) from 1957- 1970 before winding down his partnerships to eventually run Berkshire. I was inspired to do so because I have also been rereading The Snowball by Alice Schroeder’s for the past month, and it’s awesome how it takes you back to the beginning and goes year...

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Kevin Wilde September 18, 2017 Idea Exchange

Cheesecake Factory (NAS:CAKE) Comparative Analysis

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Kevin Wilde September 14, 2017 Idea Exchange

Cheesecake Factory (NAS:CAKE)

The Cheesecake Factory (NAS: CAKE) 14-SEP-2017 (EV $1.82B; Mkt Cap $1.88B; 49.0MM shares outstanding; $40.29/share) STATUS At end of 2016, CAKE had a total of 208 company-owned restaurants (all U.S. based): 194 Cheesecake Factory restaurants 13 Grand Lux 1 Rock Sugar Pan Asian NOTE: Each restaurant has sales of ~ $10.5 annually. Maintenance CapEx over the last 3 years has been between $26MM and $29MM per year.  Bakery & Training center capex has averaged $11MM annually over the last 3 years. 2016 sales of $2.276B....

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Geoff Gannon September 6, 2017 Premium Articles-01

Why Ad Agencies Should Always Buy Back Their Own Stock

Someone who’s been reading my blog for the past few years emailed me this question:   “With (Omnicom), I particularly like the durability of the advertising agency industry, the nature of the customer relationship (long term in nature and high retention rate), it operates in a rational duopoly environment and good capital allocation policy of John Wren. I also like WPP which also looks attractively valued at around £14 but I prefer OMC as it uses the excess cash to buy back its shares compared...

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Geoff Gannon September 6, 2017 Premium Articles-01

Hold Cash: Wait till You Get Offered 65 Cents on the Dollar

A Focused Compounding member who fears the stock market is expensive posted this comment: “Hi Geoff, S&P today is expensive based on TTM PE of 24 and CAPE of about 30. An investor whose holdings consist entirely of stocks outside S&P500, will still see a drop in the prices of her equities if the S&P falls even if she has bought her holdings significantly below their estimated fair values. In your opinion, what’s the best way to position oneself going forward with the goal of...

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Geoff Gannon September 5, 2017 Premium Articles-01

Weight Watchers (WTW): Mistakes Made Over 4 Years of (Emotional) Volatility

I lost a lot of money in Weight Watchers. Let’s look at why that was.   As I write this article, Weight Watchers (WTW) stock is at $44.30 a share.   I bought my shares at $37.68 a share in 2013 and sold them (in March of 2017) at $19.40. So, I realized a loss of 49%. I also tied up money for about 3.5 years. During this same time period, the S&P 500 returned about 12% a year. I probably could have found something...

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Geoff Gannon September 5, 2017 Premium Articles-01

Unleveraged Return on Net Tangible Assets: It Only Matters When Coupled with Growth

The best way for you to understand unleveraged return on net tangible assets is to look at the reports in the Library section of Focused Compounding. I’m going to give you the basic formula for return on unleveraged net tangible assets here, but it won’t make as much sense as seeing the calculation for yourself by looking down each yearly column of the “datasheet” on one of the 20+ reports in the Focused Compounding library.   The definition of return on unleveraged net tangible assets...

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