"There is a symbiotic relationship between boards and CEOs today. As a result there is no way to hold these guys accountable." Carl Icahn.

http://www.youtube.com/watch?v=FcWg4897yIM

The way stock options are written today the stock has the follow price

2005 $100
2006 $97
2007 $78
2008 $55
2009 $23
2010 $11
2011 $23
2012 $33
2013 $33

The way stock options are written the CEOs and employees can make $10s of millions by the excellent performance they did to their stock above. They tripled the price from 2010. Sort of like Robert Reich claiming GE does not pay taxes.

Any of you guys subscribe to the paper form of the Wall Street Journal? I've been thinking about trying it out for 3 months. I'd rather have the paper form than digital since I always have trouble reading on my computer, and also I can take the paper with me to work and read it when there is nothing going on in the middle of the night.

Is it a thick paper? I saw one on a table in a store I went to the other night and it didn't seem that big.

Holyyy...been looking at Poor Charlie's Almanack for a few weeks, but it's so pricey.

Some guy who writes a value investing blog uploaded it to dropbox today: https://www.dropbox.com/s/jdppccavwb...s.Almanack.pdf

which blog?

yeah man you cant expect people to download some random pdf file.

I downloaded it. I wouldn't have posted the link if I didn't think it was good.

Blog is www.safalniveshak.com.

Link is in the comments of the article about Munger. He has posted the PDF of other books in the past.

You just bankrupted Safalniveshak... He just doesn't know it yet.

His "about" page states that he is a minimalist. He should be fine.

Sorry, I don't understand what you mean by I bankrupted him.

India honors US copy write laws. He will be fine though. No one here will say anything. Shhhh.

I'm just sharing the source because it was a big find for me. I know he mostly caters to the India community but it's obviously viewable by the US. So I don't know. Just wanted to pass it along to everyone here in hopes that it would benefit someone.

Sorry if I shouldn't have posted it.

Hey guys here is an idea for a possible interesting investment: TomTom. A dutch navigation company currently trading at 7 times earnings at about 1 billion market cap. 50% of their business is personal navigation devices which is declining because of smartphones. But they also provide apples smart phone navigation. But the problem is that apple doesnt really use them well. So a possible take over or spin off by tom tom of their navigation software might happen soon. This way they have all the navigation expertise inhouse.

Competition is nokia and google, they cant use google, and its unlikely nokia will come in the picture. Apple has more then enough cash to buy it, and it seems their mediocre navigation software currently is kind of hurting them. Thoughts?

Also the founders of tomtom own about 48% of the company, and they are very carefull about not destroying their business, so its possible a spin off will happen first so apple can buy those specific businesses? Im not sure if im missing something here.

Are you forgetting about Garmin? I have a Garmin GPS and wouldn't ever consider a TomTom. I used one a few years ago and hated it.

1) What are their chances of surviving in a world largely dominated by google maps?

2) Because of 1) how much is their balance sheet worth?

3) Where can I find their balance sheet to find out how much they have in hard assets?

4) They aren't worth 1B they are worth 887M.. which is important because it changes how much the assets need to be worth.

5) Buying this feels a lot like buying a company that manufactures 8 tracks. I would feel very uncomfortable giving it anything remotely close to 7 times earnings when I can get lots of companies with actual futures for roughly the same.

EDIT: I found their balance sheet. They gain literally nothing from it. They actually have >1 Euro in debt/liabilities for every Euro in current assets they have. That's not good for a company whose revenue is absolutely crashing. Sometimes things are cheap because they're garbage and have no future. I strongly suspect that this stock is being priced for its chances of figuring out how to survive into the future as some kind of reasonable player in GPS. That's not a bet I'd be willing to take.

So you're thinking of buying on an Apple takeover bid? Of 1.x billion? What is your estimate of the likelihood of this happening in percent?

Take an Apple takeover off the table. Do you buy or sell the stock? What do you think the company is valued sans takeover?

I obviously did very little research so far, but i will try .

1) Apple cant use google maps, so they are forced to use Tomtom software. They also made deals with major car companies for built in sat nav. Some bigger ones are still waiting to be recognized as revenue in the future. Also they are not really inferior to google maps, they had alot of experience building a good navigation system together with the maps. From reading some reviews both seem to have different advantages. http://www.techradar.com/reviews/car...1093909/review

2) I still suck at valuation, but have a look yourself:
http://corporate.tomtom.com/investor.cfm
They had a ****load of debt 4 years ago because they bought teleatlas for 2.5 billion. They are pretty much debt free now with over 160 mill of cash on their balance sheet and less debt then that remaining. So i believe they are now ready to also do a spinoff (correct me if my l ogic is wrong here).
3)
http://corporate.tomtom.com/investor.cfm

4) I believe they are worth more when they are combined with apple. Apple is kind of ***** up integrating their maps in the iphone as they lack the expertise here. But would have to find out more about this (no idea how tho). I believe the fault is not so much with tomtom for their errors but more for the people who had to integrate it (they are also recently fired from apple). Also Apple really has no other choices when it comes to buying, so its more a question of will apple actually buy a company who does that? Nokia did it, and google has it already.

its also 887 million euros. so 1.1 billion $ i guess.

5) Their prime business doesnt really focus on manufacturing the navigation things, they manufacture the software behind it. So for example garmin isnt really competing with tomtom here. I believe garmin even uses tomtom software, but i would have to look this up (discoverd this thing yesterday) I think almost 50% of their revenue is from software now, and they have much higher margins with that. That is also a business that is hard for competitors to just enter.

@thruth:
I think they are downsizing their PND (personal navigation device) business and are focussing on built in sat nav for cars, sport watches and licensing with companies like apple. Like i said they have some deals coming through with peugot and citroen in the future, so that will mean alot of cars that have built in sat nav i think (but would also need to do more research on this). Those are businesses that are growing with high margins, so if they would do a spinoff it could be interesting. Currently they only show their revenues, and 50% come from those businesses, but they dont show how much of cost of revenue is from their PND business.

(little note about their sportswatch business, so far they havent been very succesfull there (since launch at end of '11, but its a 1 billion $ market and they are working on it).

let me know what you guys think, posted it here to get some feedback.

I believe a dutch bank said the odds were 30%, and a take over bid could be more then 10 euro per share (currently at 4 euros), since tomtom paid so much for teleatlas 4 years back. And they improved on those maps with their own software now. I see rumors that it could even be more, but i have no idea how reliable these are. I also do not know how to calculate the odds here and how to make an estimate of value here. But since Apple doesnt seem to have much other alternatives and the maps are important to them it seems tomtom has a good negotiating position here. SO the question here is, can apple figure this out and make it work without buying tomtom?

BTW i forgot to mention, Apple wants to build their Ios into cars now, and combining this properly with tomtom maps seems even more important then?

adding one more thing (this is going to become unreadable lol) google bought a feedback start up that basicly would let people give feedback on the routes people choose with google maps. So lets say you had to turn left somewhere, but there wasnt a left turn then feedback would cause a quick correction. They bought that company for 1 billion. And it was pretty much a few year old start up.

this guy explains some parts better then i do
http://uneasyempires.blogspot.nl/201...uy-tomtom.html

That's a solid argument for Apple buying out TomTom. At the same time lets accept the fact that TomTom has basically one way out (which is better than I thought to be honest).

It's a fairly easy pass for me... But that's because I value margin of safety quite a lot. Even if I really liked TomTom I couldn't take a huge position in it because that would involve exposure to huge amounts of real risk. (as opposed to price volatility which I can just wait out)

Hey guys,

I am new to BFI and thought this would be a good place to get feedback on my investment idea. I decided to go long Skullcandy (SKUL) today and I have a full write-up on my blog (see my profile)...but the gist is this:

Current Situation

Skullcandy IPO’d in 2011 at $20/share and had since fallen all the way to a recent low of $4.80. While the company has grown revenue through 2012, operating margins have contracted and management has made several missteps. The result of these missteps is a restructuring that has resulted in significantly lower guidance for 2013. In addition, the bankruptcy of a major retail customer (HMV) exposed Skullcandy’s reliance on other shaky retailers such as Best Buy and RadioShack. The company’s products, particularly their earbuds, are seen as a commodity that offer nothing proprietary in performance. Finally, Skullcandy is a microcap stock (market cap of $156mm) that has a thin market (resulting in high volatility) and low visibility to publicly followed, major (activist) hedge funds and equity research analysts alike. All of the aforementioned factors have played a role in the negative sentiment toward Skullcandy and their stock performance to date.

Thesis

At Skullcandy’s current price of $5.53 I believe is an attractive long opportunity with a 2 year holding period. The company is currently undergoing a major corporate restructuring, with turnover at the CEO, CFO, VP of International, and VP of Global Marketing positions. The new CEO, Hoby Darling, is a highly experienced ex-Nike and Volcom executive who is heavily invested in the company. He has shifted the company’s focus onto improving customer experience and retail sell-through (via demand creation and repackaging). The company has already gone from being an OEM, where they outsourced design and manufacturing, to an ODM, where there are more proprietary components in their products. This shift will improve the quality and reliability of their products and should differentiate Skullcandy in the marketplace. Their latest products have shown early success at the core retail level and consumer level, including the Crusher headphones, which are getting rave reviews. In addition, retail sell-through is being improved upon through a reset of their previously unsuccessful repackaging strategy (which did not differentiate their products) and by leveraging their brand ambassadors (athletes, models, etc.) at the point-of-sale. Improved retail sell-through means less discounted/off-price sales and higher gross margins.

Regarding Skullcandy’s reliance on retailers, particularly Best Buy which accounted for over 10% of sales in 2012, I believe the reaction to the HMV bankruptcy has led to an overblown negative outlook on all of Skullycandy’s retail customers. While Best Buy’s comparable store sales were down in Q1, they have been able to stabilize their store count, as they are forecasting 1,055 stores FY2014 versus 1,056 FY2013. Other major retail channels, such as Target and Zumiez, are going strong. And RadioShack is in the process of a turnaround while aggressively expanding internationally in markets where Skullcandy has a presence.

Valuation

I did an NPV analysis using a 15% discount rate to be cautious and got the following results:

Gain (Loss) %
Bear case: (10.2%)
Base case: 36.7%
Bull case: 95.5%

I believe the negative sentiment toward the company has resulted in shares of Skullcandy being oversold and most of the downside already being priced in. At $5.53, the stock presents an attractive risk-reward scenario for investors. The corporate restructuring and turnaround of the company should begin to have an impact in Q1 2014 according to management. Therefore, I plan to hold my position until my thesis changes or catalysts and stock appreciation have been realized.

Interesting. I will definitely track it over the next few months to see the next few quarterly reports and conference call transcripts and look into it more carefully.

Assuming the restructuring won't happen until roughly Q1 2014 as you predicted, then there is no hurry to establish a position now, especially if the funds that own it get skittish and start dumping it around October/November.

Just to be clear, restructuring is happening now (this is the reason for the lower guidance for 2013, which led to the stock hitting lows) and the full impact of it won't be felt until Q1 2014 (according to management). But there should be evidence of whether it is working or not earlier than that, and if it is proving to be successful it should be a catalyst that leads to a jump in stock price.

There are also tailwinds (namely the growth of the worldwide smartphone, tablet, and gaming accessory industries) that can spur revenue growth for Skullycandy over the next few quarters, but these are secondary to the results of the restructuring effort in my opinion

wow. SKUL is the best tip I've seen in this thread period. And from a guy with 2 posts. I just got done doing a preliminary work over. I fully expect to be long before the market close tomorrow. In fact if I hadn't moved today (My entire body hurts right now. Welcome to the joy of spending 20/36 hours on your feet hauling heavy **** as a fat guy) I would probably work on finishing my analysis on it tonight and just operate on 4 hours of sleep to catch the open.

Good ****ing job dude. Even if I find something horrible this is definitely the best prospect from 2p2 since Ahnuld put up PRSC (which I missed because I wasn't paying attention).

Any other information on why we're investing here?

What makes it the best tip?

Is this investment purely based on it being extremely undervalued?

Am I assuming that this isn't meant as a long-term investment?

it does seem to be an average product and not really stand out. But i supose the new crushers are very well received. And they do seem to capture the mid priced headphone market pretty well. So this should increase revenue. They have 75mm in accounts payable , i supose most of that is going to be written off because of the HMV bankruptcy?

And how does the bankruptcy of HMV affect sales to other vendors? Are they afraid that skullcandy will cut corners on production and give them inferior products or something?

I've been looking at it too - ever since the IPO. The bear case is that they have always been a marketer of cheap headsets at premium prices and might not be able to transition to being a marketer of good headsets at premium prices.

I think it is a pretty decent long-term play with a lot of upside.

The HMV bankruptcy has already been written off their books as a ~$1.4mm bad debt expense. Their accounts payable is due to suppliers, not to their customers.

The HMV bankruptcy has no impact on sales to other vendors...the Skullcandy product had nothing to do with their bankruptcy, was most likely just the popularity of digital downloading movies/TV and CDs that led to the company's death. The only way this impacts Skullcandy moving forward is that it is one less retail customer/outlet for their products (but they weren't a huge account and they are constantly working on expanding existing retail relationships and establishing new ones).

There is significant brand equity that is being discounted and the public is discounting the value of their fast-growing Astro brand due to the negative sentiment toward Skullcandy. The new CEO is an experienced senior exec who left a very cushy job at Nike to go to a "struggling" company in Skullcandy. This leads me to believe he saw tremendous upside in the company himself (including him buying shares at ~$5.41 on top of his equity comp package).

It is an investment because there are clear catalysts that allow an investor to realize gains in the event of a turnaround. If the turnaround is unsuccessful, the stock has already been beaten down to the point where the downside is not great (10-15%). In the event of a successful turnaround, trading multiple expansion could really lead to some solid gains (90-100%).

For me, I see catalysts that will lead to appreciation in stock price over the next 2 years. If management is doing a good job creating shareholder value and new catalysts that would extend my holding period present themselves I would surely do so.