Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (8171)	9/7/1999 11:01:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 78822

I have encountered Newell management in several past lives and have been very impressed with them, as has Wall Street. These guys are really good at what they do, which is acquire boring housewares businesses and improve their margins. That said, the stock was probably overvalued, and even with the drop last week I agree with Paul - at best the stock is fairly valued in my view. Newell has built itself by feeding on plankton - little 50 or 100 million acquisitions that they could buy for a bargain. Eventually you get so big that a 50 million acquisition doesn't do it anymore - you need 10 of them a year to be meaningful. So they go out and acquire Rubbermaid, a company I view as very challenged by realities in the market - things even Newell might not be able to correct. Rubbermaid is a big proportion of the company's sales - they had never done an acquisition nearly this big before, and they may be choking on it. Analysts on the conference call today were almost hostile to Newell management - a management they worshiped until very recently. Their sin - they have missed four straight quarters, starting with the Rubbermaid acquisition. I think we have time with this one. I use this time to figure out a target price on my terms, then wait. If I had to guess now on a superficial analysis (I don't) I would guess this bottoms at 13 or 14 times earnings after one more disappointment in the fourth quarter. There are plenty of businesses of similar quality trading at 13 or 14 times earnings because they have missed quarters. No reason I can see why Newell should bottom at 18 times earnings. As Paul said, I too would like to hear other views. I have not done nearly enough work for this to be taken as anything particularly meaningful.