Hi all,
I usually hang out at the Value Investing thread, where we got into a a good discussion about BGP after I noted the positive implications of the recent strategy statement re: the internet. Someone noted that on the Value thread, if 3 people can agree on something, then it's probably a good idea. BGP got those 3.
That night I made Borders the pick of the month at my value web site (http://www.valuestocks.net), then bought some a few days later. I posted at the Yahoo thread on some of my reasoning, as well as the Value Investing thread. A no-brainer at 14, but it kept ticking upward so I went a head and got some in the 16's. Still a no-brainer.
Below is part of my reasoning as posted on the Yahoo thread.
There has always been and always will be a contingent of people that like to browse and buy in bookstores because of the ambiance, and don't mind paying a premium over the internet for it. Amazon will get its share of sales, but only because of its ridiculously low prices. The profits won't be there. Whereas the book megastores like Borders provide a soothing environment in which to buy and relax, Amazon competes solely on price, and is more of a commodity player than the physical bookstores. How long its model will last is up in the air. But once the internets cool off, Amazon better start showing that gross margins are moving in the right direction or it will lose its capital sources. The model is flawed, and the float it gets on sales overhyped. How many people realize that Amazon is issuing debt at 10% and preferreds to get the working capital it needs to stay afloat? Or that the CFO admits she is afraid of offering more stock (the prudent thing) because she doesn't want to burst the bubble. Meanwhile, Borders keeps churning along, growing very profitably out of free cash flow, debt-free. I find great strength in management's resolve,
in this frenzied climate, to say no to the internet money pit.
Especially for anyone with an investing interest, Borders has
the best tangible selection anywhere. Would love to discuss it more.
Good investing,
Mike
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