Player Avatar JohnCLeven (76.27) Submitted: 2/18/2014 11:51:24 PM : Outperform Start Price: $34.95 MAT Score: -12.06

MAT owns a number of insanely great brands that are still going to relevant for the foreseeable future, though perhaps a tad less so than in the past. Barbie, American Girl, Disney licensed toys, Scrabble, Fisher-Price, Little People, Matchbox cars, Uno, Power Wheels, Winnie the Pooh, SpongeBob branded toys, Apples to Apples, etc. They basically have what amounts to a toy duopoly with HAS. Duopolies in high-return industries tend to be attractive places to be. Ask Pepsi and Coke, or S&P and Moody's.

For at least two decades, but probably longer, (alas I only have 20 years of data), Mattel has consistently earned unusually high returns on equity and capital, and I think the chances are high that that consistent trend will NOT end in the near to medium future.

MAT needs little capital to sustain it's business, and can instead use that excess capital to buy back lots of stock, and pay lots of dividends, and they have done in the past, and will continue to do. They're significantly less susceptible to technologic disruption than most businesses, and they don't need to pour money into R&D or anything like that. They don't need to reinvent themselves every few years, like many businesses do. They're selling many of the same products they were selling a generation or two ago, and probably will still be selling a generation or two from now.

I'll tell you one thing for sure, MAT's revenues are not likely to double in the next decade, nor will net income, but who cares? You probably shouldn't.

What is likely to happen, I think, is that MAT's net income and cash flows grow at a snail's pace, and that slow growth will be amplified modestly, but significantly, with buybacks. (Buybacks which increase your ownership of these wonderful, timeless brands) MAT's overall profits could grow at just a couple percentage points per annum, and you could still do pretty well, if you also factor in buybacks, and dividends over time.

In conclusion, we have a simple business, in a basic-needs type industry, with fairly limited competition, and historically wonderful profitability, available at a pretty fair price after a 25% sell-off. I think MAT's total return is likely to outperform the S&P 500 in the next few years.

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Member Avatar valuemoneygreen (82.36) Submitted: 3/4/2014 12:45:52 AM
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Would you be a buyer of DLPH at current price or at all? Check it out if you have time.

Member Avatar JohnCLeven (76.27) Submitted: 3/4/2014 1:12:14 PM
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Haven't had a chance to REALLY look at DLPH yet.

The first thing I see is just a few years of data. That's usually a red-flag for me. Why only a few years?

•   2005: Delphi disclosed irregular accounting practices. A number of executives, including CFO Alan Dawes, resign. Delphi Chairman J.T. Battenberg retires. Delphi files for Chapter 11 bankruptcy protection to reorganize its struggling U.S. operations. As a result of this action, the Securities and Exchange Commission granted an application by the New York Stock Exchange to delist Delphi's common stock and bonds.[4] The stock traded over the counter on the Pink Sheets electronic exchange.

•   On March 4, 2005, Delphi said it had fired its CFO and would restate earnings between 1999 - when Delphi spun off from General Motors Corp.(GM) - and 2004 for improper reporting of rebates, credits, or other payments from suppliers.[20] In June, 2006, Delphi said in a filing that it would restate its 2005 report, which would increase Delphi's reported 2004 net loss by $65 million.

May 2008: Delphi filed a lawsuit against investors. The lawsuit seeks to impose payment by investors in the amount of $2.55 billion in securities to aid Delphi as it seeks to come out of bankruptcy. U.S. Bankruptcy Judge Robert Drain in New York ruled to allow Delphi to seek payments through a contract against Appaloosa Management LP as well as denying investors' request for a cap of $250 million for damages.and

Member Avatar JohnCLeven (76.27) Submitted: 3/4/2014 1:19:07 PM
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Aside from the rough history, (difficult to trust them) the recent years of data show a very profitable business, at what seems to be a pretty good valuation. Also, it is a fairly simple to understand, and necessity-type business, which we like.

I'd have to go through the 10-K's and stuff to get a better idea of what's really going on, and I don't have time to do that right now.

I'll try to get back to you over the weekend with some better thoughts.

I would NOT buy this company in real life, but if the 10-K's were great, and the future looked great, and the price was right, I might give it a CAPs upthumb...maybe.

But I really would like to see at least 10 consistent years or more.

Anything less, for me, usually belongs in the "too hard pile" or the "maybe in 5 years, if they can keep these high returns going, and it's cheap" pile.

Member Avatar JohnCLeven (76.27) Submitted: 3/4/2014 10:52:55 PM
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And Value, while I have your attention, I was wondering if you had any thoughts on either DLTR or FDS at these prices?

Member Avatar JohnCLeven (76.27) Submitted: 3/4/2014 10:54:29 PM
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Member Avatar valuemoney (99.99) Submitted: 3/9/2014 11:08:52 PM
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Love both dltr and more so fds but not at current prices. I was watching dltr to add to my picks a bit ago but it didn't drop quite far enough relative to the market. Close though. It had my attention. Sorry for the late reply I don't get on CAPS as much as I used to. Just glance at ur page and a couple of others every so often. Did see u end wag tho! Nice 100 pointer. I would have been a shame if u ended your pick any earlier. Good to see it hit $65 before u ended it!

Member Avatar valuemoney (99.99) Submitted: 3/10/2014 9:42:56 AM
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I think you should really check out PKX. If you look at its market cap and its normalize earnings I would say it is currently 35% undervalued. $98 would be my min. valued price but it wouldn't be unreasonable if it traded $107 to $120. I added it to my valuemoneygreen caps page with 120 in mind when I picked it at 77.85. I think at these prices a double is easier to see than the S&P trading at 3740 in the next 3 years.

Member Avatar JohnCLeven (76.27) Submitted: 3/10/2014 3:02:01 PM
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I'll check PKX out again.

As you know, I generally stay away from commodity producers.

However, I've heard a few very good investors pitch PKX before.

Munger only owns 4 stocks, and PKX is one.

I have to assume that PKX is the low-cost producer then?

And if they are, what is the best way to verify that? Margins vs peers?

PKX's cyclicality probably puts PKX outside my circle of competence, but assuming we're looking at the dominant steelmaker in the world at 0.5x book value....I can see why that would peek the interest of some people.

Thank you for the recommendation! (Still haven't had a chance to really look at DLPH either yet, i'll get back to you eventually on that one)

Member Avatar valuemoneygreen (82.36) Submitted: 4/4/2014 4:07:08 PM
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I took a stake in PKX today. Bought @ $70.36. Sold part of my WFC holdings today @ $50.24 to fund the purchase.

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