Thanks, Scott. Nice catch. With a big partner like Foot Locker, Hyde can probably contribute the product and the design and Foot Locker the dollars. Perfect. Remember, this is a net-net value investment. So we don't need 20% growth. All we need to get a 40% profit is for the stock to be valued for the liquid assets that are already there. I like them odds. This stock is boring beyond belief, but I think it will get me at least a 25% return within two years, regardless of what the market does. By the way, that's a good return. Thats versus a historic average of 9% (yes, your $20 stock goes to 22!) and a market which I think is 20% lower two years from now.
And speaking of good odds, more on U.S. Can. This morning it was announced that their closest comparable, Continental Can, got acquired at a 50% premium. I clearly bet on the wrong horse, but I bought 300 more shares of USC on the news. The stock hasn't moved yet. The companies are not identical, but they are similar. USC is clearly for sale in the next year. If not, at the very least there will be a management change, which is great news given the idiocy of the current management. USC trades at 16 1/4, or about 5 1/2 times cash flow. I think free cash flow is going to increase big when capital expenditures go down according to plan. Based on the Continental Can valuation, the stock is worth 22. I think it is worth closer to 30 to a strategic buyer, and there are several hunting for acquisitions. Its hard to see how the stock could go much lower. |
