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

To: Paul Senior who wrote (45591)	11/19/2011 3:09:47 PM
From: Spekulatius	Read Replies (4) \| Respond to of 78673

re MGDDY and the tire market. FWIW , I believe there is a fungible difference between tires. USA is the land of low priced tires that blow up every once in a while. I have never seen so many cars sitting on the side of the road with blown tires than in the US. I know that the rest of the world thinks differently. Certainly I do and I am one individual who tries to save a buck when I can but I certainly wouldn't buy tires with nylon armament. Michelin has not best track record in terms of capital allocation. I remember episodes like a price war in the US to gain market shares against Goodyear that left them bloodied. I believe that was in the late 80's or early nineties. What attracted me to the tire companies a while ago was the observation that they don't have trouble raising and keeping prices with input costs (Crude, rubber) early last year. That is a change from my historical observations. As such, I believe that the tire companies may be able to do better than expected, and Michelin is the cheapest of the global manufacturers. I bought Michelin on the last dip starting in July or August and sold from the 13 to the 14$ range. Know I am trying to do the same trick again. It's simply to cheap for their low levered balance sheet, 4%+ dividend yield and ~7X earnings. I believe that Pirelli is the best managed tire company; the stock was available for a small premium to book and 8x earnings in the 2011 trough. maybe it is available for this price again - I think this stock is a good buy there.