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

To: bruwin who wrote (61450)	11/12/2018 6:13:38 PM
From: Spekulatius	Respond to of 78666

re MHK - yes the annual numbers look good still, but the last two quarters showed some weakness in margins due to cost pressure. This and a possible housing slowdown are the reasons why MHK stock is weak. FWIW, CUERVO.MX results were weak with respect to margins as well. Apparently the cost pressure is due to input cost from the Algarve used to produce the tequila. This is surprising because Bechtle was supposedly on the way to become self sufficient, but that is not what is happening. Supplies are tight (due to demand for premium tequila made from 100% Algarve, so more plants are needed to produce it), so Bechtle resorted to harvesting plants earlier, with the down side of less yield and higher cost (because they contain less sugar). It sounds from the CC that this will persist a while including 2019. Ouch! On the positive side, demand is healthy and her category that CRURVO/Bechtle is in is very healthy in terms of demand. I am just surprised they don’t have more pricing power to compensate the higher input costs. I am holding my losing position. Added some GS today, after the drop from the soured deal in Malaysia. Cost of doing business at the bleeding edge, a cynic would say. The stock trading for 1.1x tangible book though ($186/ share), which is cheap, given their current profitability.