The third edition of the Festival of Stocks is now up at Value Investing, and a Few Cigar Butts.
The Festival of Stocks is a new blog carnival focused on highlighting bloggers’ best recent posts on stock market related topics.…
Read moreBelow is a letter from Mr. John L. Morgan, beneficial owner of approximately 7% of Lenox (LNX), to Ms. Susan E. Engel, Chairwoman and CEO of Lenox.
Dear Susan,
When your board offered me a directorship on September 18, 2006, we discussed the reasons that made it unacceptable. At that time, I reiterated that I could best serve the shareholders of Lenox Group by assuming a leadership role on the Board of Directors and playing an active role in formulating and guiding the strategic direction of the Company. Furthermore, I expressed my intention to not make changes in the management or Board of Directors. My views were based on information I had at that time.
The Board’s rejection of my offer to help the Company create a successful strategy has given me a different perspective. I now feel that the Board has decided to pursue a course of action that is not in the best interests of the shareholders and is a continuation of the strategies that have failed to create value over the past ten years.
The management team and Board of Directors continue to behave like the Company is a large, successful Company that has margin for making more mistakes. I do not agree. My offer to assist the Company in changing its strategy to benefit shareholders has been rejected although I proposed to work with the existing management and Board of Directors. You have made your position clear and I hope this letter will do the same for me and other likeminded shareholders.
Very truly yours,
John L. Morgan
The Ownership Situation
First, let me explain the ownership situation. The reporting persons are John L. Morgan, Kirk A. MacKenzie, Jack A. Norqual, and Rush River Group. Rush River Group is a limited liability corporation (LLC) of which Morgan, MacKenzie, and Norqual are members.
Rush River was formed in December 1998 in Minnesota and “its principal business activities involve investing in equity securities of privately owned and publicly traded companies, as well as other types of securities.” As far as I can tell, the only members of Rush River are the three aforementioned men: Morgan, MacKenzie, and Norqual.
According to a recent SEC filing, Morgan beneficially owned 6.1% of the outstanding shares of common stock in Lenox, Rush River owned 0.79%, MacKenzie owned 0.07%, and Norqual owned 0.07%.
Please keep in mind that this 7% stake in Lenox is controlled by Mr. Morgan; but, not Winmark Corporation (WINA), a publicly-held franchisor of retail stores. This is an important distinction to keep in mind (especially since Winmark is a public company).
Morgan is the Chairman and CEO of Winmark; MacKenzie is the Vice Chairman. However, their stake in Lenox has nothing to do with Winmark. In fact, last time I checked, Winmark did not have any material investments in marketable securities.
The reported position amounts to 989,300 shares of Lenox. Shares of Lenox last closed at $6.23 a share. So, the position would be worth a …
Read moreForbes is out with its list of The 400 Richest Americans.
Have you ever wondered how Forbes knows who to put on the list (and where)? Here, in the magazine’s own words, is Forbes’ methodology:
Our estimates of people’s net worth are deliberately conservative and should be considered “at least” figures. We do our best to value everything, from stakes in publicly traded or privately held companies, real estate and investments in natural resources to art, yachts and mansions. We dig through SEC documents and court records; call analysts, employees, competitors and ex-wives; and look at newspaper and magazine articles. We also take a hard look at debt. However, we do not pretend to know everything on a private balance sheet.
All numbers have been rounded to the nearest $100 million. All publicly traded shares were priced Aug. 31. Privately held companies are valued by coupling estimates (or, in some cases, company-provided numbers) of revenues or profits to prevailing price/revenues or price/earnings ratios for similar public companies.
A lot of people have been (and will be) commenting on this list. So, I’d like to do something a little different. I’m simply going to go through the list (in order) picking out those names that might be of interest to readers of this blog and saying a few words about them (and their companies).
(Due to time constraints, I only selected billionaires who made the top 50.)
1 – William Henry Gates III ($53.0 billion)
Bill Gates, chairman of software giant Microsoft (MSFT), once again takes the top spot. Today, more than half of Gates’ net worth is invested outside of Microsoft. Despite a recent resurgence in its share price, Microsoft is as cheap as it’s been in many years. The stock has even started to catch the attention of some value investors. Microsoft has been buying back shares and has plans to buy back even more.
In June, Gates announced he will give up his day-to-day role at Microsoft; however, he will remain the company’s chairman. This transition will be completed in mid 2008.
Related Reading
2 – Warren Edward Buffett ($46.0 billion)
Warren Buffett, chairman of Berkshire Hathaway (BRK.B), finds himself in a familiar spot – right behind his good friend Bill Gates. Unlike Gates, Buffett still keeps the vast majority of his net worth in a single stock. Shares of Berkshire are up over the past twelve months.
As a result, Buffett’s net worth increased, despite the beginning of the process that will ultimately lead to Buffett giving tens of billions of dollars to the Bill & Melinda Gates Foundation (and four other charities started by members of his family). The secret to Buffett’s success: since 1965, Berkshire’s value has compounded at an annual rate of 21.5%.
Related Reading
On Some Lessons From Buffett’s Annual Letter
Against Mr. Lynn’s Buffett Bashing Philippic
Berkshire Hathaway Discloses New Investments
6 – Jim C. Walton ($15.7 billion)
Jim Walton is …
Read moreWelcome to the second Festival of Stocks. The Festival of Stocks is a weekly blog carnival dedicated to highlighting the best recent posts on stock market related topics.
I am proud to present this week’s best entries to the Festival of Stocks. The articles are listed by category. The stock tickers are linked to Yahoo Finance. I have included my post “On Nintendo” in this week’s festival; it is a follow-up to an earlier post discussing Sony (SNE) entitled “On the PlayStation 3 Delay“.
Stock Analysis
Lifetime Brands – In Your Kitchen, Should They Be in Your Portfolio? By Inelegant Investor
The Inelegant Investor takes a look at Lifetime Brands (LCUT), a fast-growing supplier of cutting boards, bakeware, pantryware, tabletops, and cutlery. At fourteen times 2006 earnings, he likes what he sees.
Stocks: LCUT
The Buckle (BKE) at $35.10 By Dah Hui Lau
Dah Hui Lau explores the investment potential of The Buckle (BKE), a retailer of casual apparel, footwear, and accessories with a focus on denim. After asking and answering eight important questions (such as “is management shareholder oriented?”), he concludes shares of this undervalued retailer provide an opportunity for long-term value investors.
Stocks: BKE
Costco, At What COST? By SINLetter Blog
Asif Suria always knew Costco (COST) was a good business. However, the stock had always looked a little overpriced. Three weeks ago, Costco’s stock fell when the company warned it expects lower fourth quarter earnings. So, is now the time to start a position in Costco?
Stocks: COST
Quietly Marvelous (MVL) By One Guy’s Investments
Marvel Entertainment (MVL), home of the X-Men and other lucrative comic book franchises, had a terrific month in the stock market. But, the real test will come in 2007 and 2008. In ’07, the company will release three possible hits. In ’08, Marvel’s first self-produced film, Iron Man, will arrive in theaters.
Stocks: MVL
Dell, Not Yet? By Vitaliy’s Contrarian Edge
Shares of Dell (DELL) now trade at multiples low enough to attract value investors. But, are Dell’s problems truly short-term in nature? Or, do serious long-term threats lurk below the surface?
Stocks: DELL
Tom Joad’s Truck By Jeff Matthews Is Not Making This Up
As a Dollar General (DG) bull reiterates her buy, Jeff Matthews goes on an unscientific tour of some of the company’s stores in Mississippi and Tennessee. He finds nothing but “the same old stuff in the same old displays”.
Stocks: DG
Reader Question Regarding Unifi By Fat Pitch Financials
A reader asks George what he thinks of Unifi (UFI), “a textile company selling at approximately 0.36 times book.” George smells a cigar butt – and prefers to leave the dirty business of trying to get that last puff to someone else.
Stocks: UFI
Overstock.com By Value Investing, and a Few Cigar Butts
Mike takes a long look at online closeout retailer Overstock.com (OSTK). At a price-to-sales ratio of approximately 0.5, he …
I’ve updated the description of the Gannon On Investing Newsletter. The page now includes actual thumbnail images of sample pages from previous issues of the newsletter.
The Gannon On Investing Newsletter is a quarterly newsletter covering stocks purchased for my personal portfolio. A single issue costs $75.00. A one-year subscription (4 issues) is $275.00.
The newsletter is distributed both as a PDF via email and as a printed copy via U.S. mail.
Learn More About the Gannon On Investing Newsletter…
Read moreI’m hosting this week’s Festival of Stocks. You can send in your submissions here.
The Festival of Stocks is a new blog carnival focused on highlighting bloggers’ best recent posts on stock market related topics.
Posts discussing specific stocks are especially appreciated. Many blogs discuss smaller and lesser known stocks in great detail. This Festival provides a single location where the best such posts (as well as other stock market related pieces) can be collected and presented to readers who wouldn’t otherwise have had the chance to read them.
If you have any questions about the Festival, please email me.
The Festival will be hosted here on Monday, September 18th.
I’m accepting submissions now; so, you may send in posts as soon as they’re written. There’s no need to wait.
Read moreEven before last week’s announcement from Sony (SNE), it seemed nearly certain that company’s dominance in the PlayStation 2 generation of video game consoles would give way to a much more level playing field for the PS3 generation. This time around, Sony faces much stiffer competition from both Microsoft (MSFT) and Nintendo (NTDOY).
While the Nintendo name is most closely associated with a video game platform (the NES), the company’s real focus has always been the games rather than the platform. Herein lies the true distinction between Nintendo and its two larger rivals. Nintendo seeks to make good games. Microsoft and Sony seek to control a distribution channel.
Nintendo is the only company among the three console makers that began life as an entertainment company – and it shows. Microsoft is known for software; Sony is known for hardware; and Nintendo is known for games.
American gamers are well acquainted with the Nintendo brand; but, American investors generally know very little about the company. That’s unfortunate, because despite all the attention given to Sony and Microsoft’s video game operations, Nintendo is the ultimate pure play video game company.
Nintendo is big. The company surpasses U.S. video game publishing giant Electronic Arts (ERTS) in sales, earnings, and market cap. On the last count, some may argue that Nintendo only has a larger market cap than EA, because its stock price has risen sharply over the past year, while EA’s share price has actually declined. However, there’s a much simpler explanation.
Nintendo has a larger market cap than Electronic Arts, because Nintendo (the business) is worth more than EA (the business). The run-up in Nintendo’s stock price may be entirely due to improved investor perceptions of the company’s future prospects as a result of the good press surrounding Nintendo’s soon to be launched console, the Nintendo Wii.
Regardless, such an increase in the price of Nintendo’s shares was justified by the rather low value the market had previously placed on Nintendo’s business. The same can’t be said of Electronic Arts. Even after underperforming the S&P; 500 over the last three years, EA’s stock price remains at levels that are nearly impossible to justify using any form of rational thought. So, Nintendo really is the world’s largest pure play video game company.
Nintendo is an interesting business to write about from an investor’s perspective for several reasons. The company operates in an exciting industry with excellent long-term prospects. It’s more reasonably priced than many public companies in that industry (although that’s not saying much). It’s a truly unique business (with a unique past), and it has a clear vision of what it is and what it isn’t. Obviously, Nintendo’s tremendous intellectual properties add to its appeal both as a subject of a post and as the object of an investor’s interest.
Nintendo has been a good steward of its intellectual properties. It’s been very careful to protect the image of its most beloved characters. In fact, some would say …
Read moreFat Pitch Financials is hosting the very first Festival of Stocks today. You’ll find a lot of great articles over there. All have to do with stocks rather than generic personal finance topics like many previous carnivals. So, all of the articles will likely be of great interest to readers of this blog. I encourage everyone to visit the Festival of Stocks.
I’ll be hosting the Festival of Stocks next week. Feel free to email me about it.
Don’t forget you can bid up the Festival of Stocks on Fat Pitch News by clicking on the green “bid up” button at the bottom of the post – bidding up the Festival will help share it with other like-minded investors via the value investing community site Fat Pitch News.
Read moreFat Pitch Financials recently announced it will host the first edition of a new Festival of Stocks on Monday:
“The Festival of Stocks will be a blog carnival dedicated to highlighting bloggers’ best recent posts on stock market related topics. This will include research and commentary on specific stocks, industry analysis, ETFs, REITs, stock derivatives, and other related topics.”
I think this is a great idea and have agreed to host a future edition of the Festival of Stocks on this blog (see schedule).
I hope readers will visit Fat Pitch Financials on Monday for the Festival’s first edition and be back here for week two.
Hosting the Festival
For those with their own investing blogs, see the announcement at Fat Pitch Financials for details on how you can host an upcoming edition of the Festival. To give you an idea of what hosting entails, here’s an excerpt from the announcement:
“The Festival of Stocks will be different from other blog carnivals in that I encourage hosts to be selective in the post links they include and to limit the number of posts included (up to the discretion of the host) to about twenty stories in order to cut down on the burden of hosting and to keep the carnivals readable and not overwhelming. I will be introducing a mechanism to help hosts rank submissions and I will also be creating an optional Excel template to help make the Festival of Stocks post easier to create. Hopefully, these features will make it easy to host and make the Festival of Stocks enjoyable to read.”
By the way, I’ll be contributing to the Festival, so if you have any suggestions on what my best recent post is, feel free to sound off by clicking the “comments” link below.
Read The Festival of Stocks Launch Announcement
See The Festival of Stocks Host Schedule
Read moreAs a result of problems related to the mass production of a key component of its Blu-ray DVD player, Sony (SNE) will delay the European launch of its next generation video game console, the PlayStation 3 (PS3). Sony will also reduce the number of PS3 units immediately available in both the U.S. and Japan.
In the U.S., the PS3 will launch on November 17th, with approximately 400,000 consoles available for sale. The U.S. launch will come almost a week after the Japanese launch which will consist of merely 100,000 units.
Sony’s PlayStation 3 is the successor to the PlayStation 2, the world’s most popular (and as recently as July, the world’s best selling) video game console.
The Number That Really Matters
The fact that there will only be 400,000 PS3 units available for sale in the United States on November 17th is of no long-term importance. In fact, the launch date itself is unimportant. What matters is how many units will be available for sale in mid to late December.
Sony claims it will have 1 million to 1.2 million consoles available for sale by December 31st. I think it’s safe to assume they don’t plan to have many arrive between December 26th and December 31st. So, let’s assume there will be at least a million PS3 consoles available for sale in the U.S. by Christmas.
Will that be enough to put a PlayStation 3 in the living room of every household that wants one?
No. There will almost certainly be many people who have to go without a PS3 for Christmas, despite being willing to pay the very high price Sony is asking. But, that’s nothing new. Other consoles (including the Xbox 360) have been launched without an adequate number of units immediately available for sale.
This isn’t like failing to get enough Glad trash bags on store shelves. Once the console has launched, limited availability shouldn’t cause many people to switch their planned purchase. If they want it and it’s out, they’ll wait for it.
A delay is much worse than a mere shortage. There’s a promise (and a tangible product) behind a console that has already launched. So, very few people in the U.S. or Japan who planned to buy a PS3 are likely to change their minds because of a Christmas shortage – no matter how severe.
The Things That Really Matter
The success of any gaming platform is largely based on five factors:
Available Titles
Relative Launch Date
Price
Predecessor’s Installed Base
Technology
Of these five, technology is by far the least important factor. The four most important factors (available titles, relative launch date, price, and predecessor’s installed base) are difficult to separate. Clearly, having a predecessor with a large installed base (such as the PS2) can be tremendously beneficial, if you get satisfactory marks in the other three areas (titles, launch date, and price).
The PlayStation 3 dominates when it comes to having a predecessor with a large installed base. So, …
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