Boring Port to Buy American Power Conversion
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American Power Conversion (Nasdaq: APCC) fell into the Boring Port's buy
range today. Thus, we are announcing our intent to acquire $7,000 worth of
the stock within the next five business days. We've discussed the company at
length on the Boring Port board. In regard to why the stock has been falling
recently and in regard to the company's business model, I call your
attention to the following email exchange between myself and a friend of the
Boring Port, which was published on our board.
I've revised downward our range of the company's intrinsic value, mostly
because I've become more conservative with our near-term revenue growth
assumptions and the longer-term competitive position of the company. That's
just to say that we want to be neither too optimistic nor too pessimistic
about the company's prospective growth in the future.
Here's our APC model (formatted for Excel 95 and 7.0) showing our growth
assumptions and valuation assumptions. I've discounted all the models at 15%
because that's what we see as our cost of capital. After today's close, the
company's share price is pretty squarely within the range of intrinsic value
that we've estimated. We know the concerns that some have about the PC
industry and we don't share those concerns as strongly as some do.
Yes, we're always concerned that the secular growth rate we've witnessed
over the last 15 years in PCs will fall off. If it does that tomorrow and
doesn't come back, sure, we'd be hurt. We just don't think that will happen,
which we've discussed numerous times in past portfolio reports. Given our
growth rate assumptions and other financial assumptions (e.g., falling gross
margins per the company's guidance), we think the market is pricing in the
risks and the rewards fairly here and that our return will reflect the
growth of the PC and communications markets as well as the company's ability
to execute on those. |
