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: James Clarke who wrote (8507)	10/4/1999 12:50:00 PM
From: Daniel Chisholm	Respond to of 78517

James, re: Mattel. They have ~$1.1B of debt, and about $1.4B of goodwill + "Other Assets". Book value is $1.7B. Sales are a bit north of $5B, so if they generate any sort of positive margin they really ought to be able to keep their creditors happy (I think??). Paying ~$13 per share (~$5.5B) for $1.7B accounting book value still seems expensive (it seems even more expensive if you look at it as paying $5.5B for about $0.3B of tangible book --- yikes!!). There doesn't seem to be a Graham-type margin of safety here at all (which is OK with me, but it really ought to be acknowledged for the record), rather, we'd have to be assured of a Buffett-type situation wherein there exists a large intangible value off-balance sheet. But gosh, even at these "distress" prices premium brands sure seem to cost a lot... Provided that we are assured of the company not running into liquidity problems and being forced into bankruptcy, I can certainly see and follow all of the very good reasons for buying Mattel at these prices. It would seem to me to be a Buffett-type of "pay up for a good company", once one has a good handle on the long term value of the company (I don't yet). I haven't dug into MAT, so I don't know if the terms of their debt and the size of their interest payments are a worry or not. Have you? Do you have lots of confidence that there's no prospect of bankruptcy for them? Or are you going to make me do my own damn work... ;-) - Daniel