Weekend Values – September 26, 2010

Posted September 26th, 2010. Filed under Investing Links

A collection of value investing ideas, stocks, and analysis from the past two weeks:

Hawaiian Airlines (NYSE:HA)

Valuehuntr has put together a great presentation recommending to buy Hawaiian Airlines (HA) while shorting American Airlines (AMR).  The presentation makes a very convincing case that HA is one of the best run carriers in the world, while AMR is struggling with a legacy fleet and underfunded pension obligations.

I’m really impressed with how the information is presented in a very professional, organized, and logical manner.

The airline business is notoriously difficult (even Warren Buffett had a well publicized mistake with US Airways), but Valuehuntr certainly makes an impressive argument for HA.

Investment Analysis: The Visteon Corporation (VSTNQ)

Another great summary from Above Average Odds Investing on the post-bankruptcy valuation of Visteon Corporation.  VSTNQ was a high-profile parts company spun-off from Ford, which is close to emerging from Chapter 11 bankruptcy.

The stock is currently trading on a ‘when-issued’ basis and should see a large price boost once it resumes trading.  It also appears undervalued using very conservative multiples, along with a ‘sum of parts’ breakdown as well.

Bankruptcy investing is an area that I’ve started to explore, as it offers mispriced and ignored securities that are often event-driven as opposed to market-driven opportunities – the logic lines up very well for a value investor looking to profit from special situations.

Buyout Targets

Greenbackd featured a post (originally on TheStreet.com) from Mark Travis, CEO of Intrepid Capital Funds. The post features three undervalued stocks, including Tekelec (TKLC), Aaron’s (AAN), and Tidewater (TDW).

Travis argues that these stocks are potential buyout targets, and appear undervalued based on the price an acquirer would pay in cash to buy the company outright.

As a value investor, acquisitions can provide tremendous gains, acting as the catalyst that finally drives the stock’s price to reach its intrinsic value ( check out the recent acquisition news with NUHC, a prototypical undervalued stock).

Mid-Continental Tab Card Co.

This is an older post from almost two years ago, but I just came across it and thought it would be worth sharing.  It describes the logic behind Buffett’s investment in Mid-Continent Tab Card Company back in 1959.

“When presented to Buffett in 1959, the company had $1 million in sales, was growing at 70%+ per year and earning 36% profit margins.”

It is a great real-world example of Buffett’s thinking about investments in the early days.

A Thousand-bagger – McDonald’s in the Sixties

A fascinating research report from an analyst in the 1960s covering McDonalds (MCD).  Originally posted at Bigger Capital, it is an amazing look back at one of the most successful companies of all time.

The analyst managed to pick up shares of MCD at only $0.06 and still holds most of the original stake, an investment that has returned over 1000 times!

It is not often that an investor comes across such an incredible homerun and definitely says something for holding a concentrated portfolio full of only your best ideas.


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