Vivendi Update

Vivendi CEO says that its future lies in its content and media businesses and that it may announce the sale of its telecom units at its next annual shareholder meeting in April.

Also of note from this article is that the CEO estimates SFR to be worth 20 billion Euros by itself, or approximately $26.22 billion.  That estimate is 5 billion Euros more than the 15 billion Euros I estimated SFR to be worth in my latest sum of the parts valuation on Vivendi.

I think the CEO’s estimate of what SFR is worth is a bit optimistic, but if true that means that with Vivendi’s current market cap at $28.2 billion that the market is currently recognizing that Vivendi’s other assets are only worth a combined $2 billion.  We know this cannot be true because Vivendi’s 60% stake in $ATVI is currently worth $7.44 billion just by itself.  If SFR is really worth 20 billion Euros that means that the market is massively undervaluing Vivendi as a whole.

If I were to apply the CEO’s estimate of SFR’s value to my sum of the parts valuation that brings the value per share of Vivendi up to $42.45 per share, or $28.66 per share after subtracting debt and still not including UMG.

Vivendi’s new CEO may think that SFR is worth 20 billion Euros and as a shareholder I hope they are able to sell it for that price, but I am not counting on it, and I still think Vivendi is undervalued.

An Updated Sum Of The Parts Valuation of Vivendi, Buying More Shares, Also a Brief Update on $CMT

An Updated Sum Of The Parts Valuation of Vivendi

While I am waiting for Dole’s next quarterly report to come out so I can finish my updated valuations and analysis of it, I have been researching some new companies and reanalyzing Vivendi and Core Molding Technologies since new information has come out about both.

After revaluing CMT with updated quarterly numbers it is still selling at a very good discount to my estimate of intrinsic value and I may buy more shares at any time after hearing specifics from CMT management about how Navistar’s problems are affecting it.

When I did my first sum of the parts valuation of Vivendi in July I had no information or very limited information about the values of its subsidiaries: GVT, Canal+, SFR, and Universal Music Group.  Since that time some information has come out about three of those, which has helped clarify the sum of the parts valuation quite a bit.

Vivendi is still seeking to spin off or sell some of the below companies to unlock value in its shares.

  • An estimated sale price for SFR if Vivendi were to find a buyer is at 15 billion Euros
  • Canal+ 20% estimated price that Vivendi does not own has a conservative estimated IPO price of $900 million.  Vivendi owns 80% of Canal+ meaning conservatively its estimated stake in Canal+ has a price of $3.6 billion.
  • Vivendi is seeking 5.5 billion Euros for its 53% stake in Maroc Telecom.  Vivendi’s current 53% stake market price in Maroc Telecom is worth 4.72 billion Euros or $6.02 billion.
  • Vivendi owns 60% of Activision Blizzard which is currently worth $7.44 billion at market.
  • Vivendi is seeking at minimum 7 billion Euros for GVT.
  • I still cannot find any reasonable estimate of value for Universal Music Group so at this point I will still leave this out of my estimates.

Adding all of the above together and converting everything to US Dollars gets us to a total estimated price of $46.13 billion.  Vivendi’s numbers of shares are still 1.242 billion.

  • $46.13/1.242=$37.14 per share.

For the sake of being conservative and assuming that Vivendi will not be able to get the prices it wants from some sales or spin offs of some of the subsidiaries, which is already the case in a couple instances, I will knock off $7.14 from the per share estimate which gets us to an extremely conservative, probably too conservative, value of Vivendi at $30 per share, which still does not even include UMG or Vivendi’s cash and debt.

Here is my original Vivendi article from June for a comparison of the values then and now.

The $30 per share price is an absolute worst case estimate of value.  Today I bought more shares at $19.22 per share for all portfolios that I manage, meaning there is still a 36% margin of safety to my absolute lowest case value of Vivendi, and an almost 50% discount to my more reasonable estimate of value.  Neither of the two estimates even take into account Universal Music Group, Vivendi’s cash, or debt.

Vivendi now makes up about 25% of my personal portfolio.

Closed out partial position in Dole up almost 70% in Just 104 days

Closed out partial position in Dole up almost 70% in Just 104 days

Dole today spiked up more than $2 per share at one point and ended closing today up $1.21 per share or 9.42% on the following news, the quoted text is from The Wall Street Journal Online:

Dole Food Co. Inc. said Wednesday it is in advanced discussions with Japanese trading house Itochu Corp. for the possible sale of its packaged-foods and Asian fresh fruit and vegetable businesses.

The California-based company, said no definitive agreements have been reached, and it continues to be in discussions with several other parties regarding these and other assets.

Dole said it divulged the talks in response to market rumors. Japanese business news provider Nikkei reported that Itochu is poised to purchase the U.S. firm’s businesses for as much as $1.7 billion.

Dole launched a strategic review of its businesses in May after reporting a slump in profits. The company said in July that it was considering a full or partial separation of one or more of its business, including potential spin offs, joint ventures and sales transactions.

Dole’s second-quarter profit fell 21% as the company saw lower fresh-fruit revenue, though sales of fresh vegetables and packaged foods improved.

After the news came out I sold just under half of the position I bought for a couple people’s money that I manage, cost basis around $8.50 per share sold around $14.50 per share, or up around 66% in just over 100 days since I bought it for them.  Here is the link to my first article about Dole that got published on June 13th on Seeking Alpha.

Dole Is Undervalued, Could Be A Winner From Spin-Off Or Asset Sale

I sold about half of the position because most of the margin of safety is gone and I wanted to lock in some profits in case the deal ends up falling through with Itochu.

I kept just over half the position because I valued Dole at the very low end at $18.25 per share and as high as $48.93 per share in June.  I also kept about half of the position because if any of the potential deals do go through then Dole will be able to pay off most, if not all of its massive debt which is Dole’s biggest problem at this time.  Also if it is able to pay off most or all of its debt, it could possibly start to grow its operations which could also help the share price.

Sometime in the near future I am going to start working on an updated Dole article and apply the knowledge and techniques I have learned since the original article.

Until next time.

Dole research update, some links, and my plans

Dole

I was planning on doing an entire write up on my thoughts on Dole now that it is up almost 50% since I wrote my articles on it and its competitors, but these two links from the Motley Fool and Seeking Alpha respectively, do a good job of talking about most of what I was going to.  Why is This Insider Buying Shares of Dole?  Top Insider Buys Filed on August 15th.

I wonder what Mr. Murdock knows or expects to happen?  Since July 24th he has bought almost 5 million additional shares and he now controls just fewer than 62% of the company.  I wonder if he is thinking about taking the company private again or if he knows or expects a spin off or asset sale to happen.

In any event, it is usually a good sign to see an insider buying this amount of stock before the company is expected to announce some kind of plan to enhance the value of the company.

In my opinion, Dole is still undervalued but it has come to a lot closer to my estimate of intrinsic value. The almost 50% appreciation in stock price thus far has come on almost zero news, so I am excited to see what kind of price movement happens when and if Dole announces some kind of spin off or asset sale. The following are the links to my four articles detailing Dole, Chiquita, Fresh Del Monte, and my concluding thoughts: Part 1, Part 2, Part 3, and Part 4.

Links

From Farnam Street Blog, @farnamstreet on Twitter who I would highly recommend following, they give some quotes on learning.

From Psychology Today, and tweeted by @favillapsych who I would also recommend following, they give you examples of how geniuses think and how to improve your thinking.  I especially like this portion of the article, which I think is very applicable to the investment world, quoting from the article:

GENIUSES PRODUCE.

A distinguishing characteristic of genius is immense productivity. Thomas Edison held 1,093 patents, still the record. He guaranteed productivity by giving himself and his assistants idea quotas. His own personal quota was one minor invention every 10 days and a major invention every six months. Bach wrote a cantata every week, even when he was sick or exhausted. Mozart produced more than six hundred pieces of music. Einstein is best known for his paper on relativity, but he published 248 other papers. T. S. Elliot’s numerous drafts of “The Waste Land” constitute a jumble of good and bad passages that eventually was turned into a masterpiece. In a study of 2,036 scientists throughout history, Dean Kean Simonton of the University of California, Davis found that the most respected produced not only great works, but also more “bad” ones. Out of their massive quantity of work came quality. Geniuses produce. Period.

From Deloitte, The Persistence Project and its associated articles.  Some of the links are pretty dry, and while I do not necessarily agree with everything they put forward I do think the articles contain some very good information about what makes certain companies great in comparison to others.  Quoting from the site:

Discovering the causes of superior corporate performance

Trying to understand what makes great companies great is the defining quest of popular management research. Sadly, like the quests of great literature – from the grail to the fleece – the search seems endless. Even the most famous and influential efforts at uncovering the causes of enduring success have of late been knocked off their pedestals, and often for good reason. Why should we bother even to try?

Well, if George Mallory wanted to climb Everest because it was there, then, following Thomas Berger, we determined to try our hand at the recipe for persistent superior performance precisely because it isn’t there.

To make any progress, we recognize we’ll have to try a different approach. We’ve begun with advances in statistical techniques to define a unique sample. You can read more about that in our monograph, A Random Search for Excellence.

 

My Plans

I was planning to get right into my 2-week plan that I outlined here a couple days ago, but since my internet was out yesterday I decided to start The Investment Checklist.  On top of hearing that this book is fantastic, I hope it helps me refine my checklists and also helps me figure out a way to more efficiently maximize my research and analysis time.

After I get done the reading I will officially start my version of deliberate practice that I talked about the other day.

 

Dole and Vivendi news, Disgusting politicians (again), and “Evidence” of a coming recession

Before I get to some valuations I wanted to post these updates and news stories since it was a busy news day yesterday.

Dole

I thought this article was pretty benign yesterday when I first read it.  It is Dole’s second quarter and strategic review update.  The second quarter about matched the “analysts” expectations and they didn’t really announce anything of major value about the strategic review, quoting:

Strategic Business Review

Deutsche Bank Securities Inc. and Wells Fargo Securities LLC are assisting the Board of Directors and management in reviewing a number of strategic alternatives. The company is currently evaluating prospective transactions and options for a number of the companys businesses and has been in discussions with numerous third parties who have expressed interest in select businesses. For the worldwide packaged foods business, the company is exploring a possible sale transaction as well as a possible spin-off of this business to current Dole stockholders. The company is also exploring a possible separation of the worldwide packaged foods business in combination with Dole operations in Asia, into a stand-alone, primarily Asia-based company either through a possible joint venture with third parties interested in partnering with Dole or through an initial public offering in Asia. All of these alternatives are intended to enhance shareholder value. The company believes it is on track to achieve one or more of these possible transactions, or any other transaction in connection with the strategic review, by the end of the year. However, there can be no assurances that the company will pursue or complete any of the strategic alternatives that are currently being reviewed or any other transaction. The company intends to disclose developments with respect to the progress, if any, of the strategic review process at such time as the company determines that further disclosure is appropriate or where possible definitive agreement terms require disclosure.

 

They have been saying pretty much the same stuff for a few months now so I was surprised to see this morning that Dole is up more than $1 per share or about 11%.  Glad I bought more shares for some accounts I manage.  Unfortunately, I still have not been able to buy shares for my personal account, waiting for money to be available to put into the account, ugh.

Vivendi

Something surprising from Vivendi came out yesterday also.  This article talks about how Vivendi is allegedly looking to sell GVT, its Brazilian telecom subsidiary.  I was surprised to see this because I remember reading somewhere that they would not sell GVT, that they were planning on building around them.

In my opinion, GVT is the best long term subsidiary for Vivendi, it has the greatest upside potential, it is in a growing country that wants better telecom.  But it also is going to have a lot of expenses due to upgrading their telecom network, which might be one reason why they are looking to sell.

Vivendi must either be getting some pretty good offers for GVT, or they are having a lot of problems selling ATVI.

Disgusting politicians, again

This article is about how Eric Cantor, or someone from his office, changed language in the STOCK Act that was passed in congress earlier this year to stop insider trading on Capitol Hill.

The language that was changed would now make members of the politicians families exempt from the law.  After having this brought to their attention there is now “outrage” and they are now “working to change the law back to what it was originally intended to be.”

Disgusting politicians.

Signs of the coming recession?

First up is an article that talks about how South Korea is going through another banking crisis.

Second is an article that gives “Overwhelming Evidence of a Coming Recession” here in the US.

I will leave it up to you to decide whether you think a recession is coming or not.

Next up will be some of my new valuation techniques I have been learning