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Company name Vale SA (ADR)
Stock ticker VALE
Live stock price [stckqut]VALE[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Fair
Sales growth Good
EPS growth Good
P/E growth Poor
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $23.09
Target stock price (averages with growth) $24.01
Target stock price (averages with no growth) $20.8
Target stock price (manual assumptions) $21.59

The following company description is from Google Finance: http://www.google.com/finance?q=vale

Vale SA (Vale) is a Brazil-based metals and mining company. The Company services are divided into four segments: Bulk Material, including the extraction of iron ore, manganese and ferroalloys, as well as pellet production; Basic metals, comprising the production of non-ferrous minerals, including nickel, copper and aluminum; Fertilizers, including the production of potash, phosphate and nitrogen; and Logistic services, including cargo transportation for third parties divided into rail transport, port and shipping services. Additionally, Vale is active in investments in joint ventures and associate in other businesses. The Company operates in more than 38 countries, including mineral exploration activities in 21 countries. As of December 31, 2011, the Company operated through 18 subsidiaries and three jointly-controlled entities, incorporated in Brazil, Peru, Indonesia, Chile, Australia, Austria, Canada, Colombia, Switzerland, Mozambique, New Caledonia, Oman, Singapore and the USA.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in this stock.

 

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Part of the reason that Apple [stckqut]AAPL[/stckqut] has had such an amazing stock price run the last 2 years (even with the drop of the last 2 months) is the usefulness that its users derive from the iPhone and the iPad. This study from Asymco shows that the Apple’s influence on eCommerce exceeds its market share by a significant margin.  For your convenience, I am reproducing the analysis chart here. The commentary on Asymco’s site is worth clicking over and reading.

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Company name Urban Outfitters, Inc.
Stock ticker URBN
Live stock price [stckqut]URBN[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Fair
Sales growth Good
EPS growth Poor
P/E growth Fair
EBIT growth Poor

ANALYSIS

Confident Investor Rating Poor
Target stock price (TWCA growth scenario) $36.77
Target stock price (averages with growth) $50.66
Target stock price (averages with no growth) $40.89
Target stock price (manual assumptions) $38.96

The following company description is from Google Finance: http://www.google.com/finance?q=urbn

Urban Outfitters, Inc. (Urban Outfitters) is a lifestyle specialty retail company, which operates under the Urban Outfitters, Anthropologie, Free People, Terrain and BHLDN brands. The Company also operates a wholesale segment under the Free People brand. In addition to its retail stores, it offers its products and markets its brands directly to the consumer through its e-commerce Websites, www.urbanoutfitters.com, www.anthropologie.com,www.freepeople.com, www.urbanoutfitters.co.uk,www.urbanoutfitters.de, www.urbanoutfitters.fr, www.anthropologie.eu, www.shopterrain.com and www.bhldn.com and also through its Urban Outfitters, Anthropologie and Free People catalogs. Its Urban Outfitters stores, Websites and catalogs offer a range of eclectic merchandise, including women’s and men’s fashion apparel, footwear and accessories and an eclectic mix of apartment wares and gifts.

 

Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in this stock. I have removed this stock from my Watch List.

 

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Company name Boston Beer Co Inc
Stock ticker SAM
Live stock price [stckqut]SAM[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Fair
EPS growth Good
P/E growth Poor
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $178.24
Target stock price (averages with growth) $160.71
Target stock price (averages with no growth) $112.63
Target stock price (manual assumptions) $145.47

The following company description is from Google Finance: http://www.google.com/finance?q=sam

The Boston Beer Company, Inc. (Boston Beer) is a craft brewer in the United States. During the year ended December 31, 2011, Boston Beer sold approximately 2.5 million barrels of its products (core brands) and brewed or packaged approximately 13,000 barrels under contract (non-core brands) for third parties. During 2011, the Company sold over fifty beers under the Samuel Adams or the Sam Adams brand names, seven flavored malt beverages under the Twisted Tea brand name, three hard cider beverages under the Angry Orchard brand name and one hard cider under the HardCore brand name. Boston Beer produces malt beverages and hard cider at Company-owned breweries and under contract arrangements at other brewery locations. The Company-owned breweries are located in Boston, Massachusetts (the Boston Brewery), Cincinnati, Ohio (the Cincinnati Brewery) and Breinigsville, Pennsylvania (the Pennsylvania Brewery). During 2011, the Company launched the Angry Orchard brand family.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in this stock.

 

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If you are watching the news the last few weeks, you will have noticed that the current management team of Hewlett-Packard [stckqut]HPQ[/stckqut] is practically accusing the Autonomy management of lying. H-P management is saying that Autonomy was not worth what it paid for the company but the fault lies with Autonomy and not with H-P.

In my forthcoming book (hopefully on sale by Christmas), “The Confident Investor” I explain that investors should sit back and watch when a company makes a large acquisition.  Never own a company that sells more that 10% of itself (e.g. spins off a division) or buys another company that is larger than 10% of the original company (e.g. they acquire a company as a new division or subsidiary). These extraordinary events can radically change a company and divert its attention. While many such events will result in a stronger company, you cannot be confident in the short term that your investment is safe. It is usually safer to invest your money and time elsewhere while the dust settles.

The 10% rule of thumb is simply that, a rule of thumb. Sometimes you should be wary of a company making a smaller acquisition that is significantly above market value. Too often these deals include far too much goodwill and then that goodwill turns out to be bad.  In a recent Wall Street Journal article, “‘Tis No Season for Goodwill to Investors” it was pointed out that H-P is writing off more than $5B in goodwill for the Autonomy acquisition. They are not alone though since Microsoft [stckqut]MSFT[/stckqut] just did a $6.2B write-off and Bank of America [stckqut]BAC[/stckqut] a whopping $15.6B.

Sometimes, a major acquisition turns out well but you should always be wary. If one of your major holdings makes a significant acquisition there are a few quick steps to take. First, find out if the company is being praised by the business media. Typically, if the media is positive towards the acquisition then it isn’t terrible.  Second, do some quick analysis of the acquired company – would you invest in the company at the acquired price? If you are not sure how to establish a fair price then you really should read my forthcoming book as I spend time explaining how to value a company.

Not all acquisitions are bad but you should be wary of all acquisitions.