Value Investing News - MHP - Comments

Outstanding Work

MagicDiligence — Sun, 20 Apr 2008 20:38:32 -0400

Great job as always, Mike.

Steve

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Adding fundamental analysis to a winning
value stock strategy.

www.magicdiligence.com

This is an excellent posts -

five_whys — Thu, 13 Mar 2008 23:46:44 -0400

This is an excellent posts - almost a reminder of that a step wise disciplined approach to investment analysis is humanly possible!

I have two points to make:

1. The yield shows up as <3% right now on Morningstar as well as Yahoo Finance. Since the today's price about lowest in 2008, I cant grasp the difference between what Mark said (6%+) on Feb 4th v/s <3% today (March 13th)

2. As Mohnish Pabrai says, can we try to differentiate between risk and uncertainty.
Near term uncertainty about earnings is pretty clear on this stock due to credit crunch environment. Question is - if there is a real risk of losing earnings power or mere uncertainty as to when the earnings power well be restored for MHP.

Any opinion?

five_whys
Choose the Best Tools for Investment

reverse DCF

Jeff Liang — Sat, 09 Feb 2008 17:46:34 -0500

As Charlie Munger famously says, "Invert, always invert".

Another approach I would suggest is to invert the current stock price. At $40, the price assumes a 10-year annualized growth rate of 4.0% at a cost of capital of 10.5% and long-term growth rate of 1.0%. I would then ask myself how likely this scenario will occur, given that Moody's recently reported an earnings contraction (-54% in Q4'07 versus Q4'06) and that the SEC is looking very closely at the rating agencies (possibly imposing regulations).

I think that S&P is an excellent franchise and will be around in 10 years. However, I think that there is certainly risk that MHP's earnings will contract, which would affect a model that consists only of positive earnings growth.

I agree. Mike has done a

George — Mon, 04 Feb 2008 13:51:20 -0500

I agree. Mike has done a great job on this research. I hope his high school teacher gave him a great grade for this paper. It simply amazes me that Mike is still in high school and can produce such top notch analysis like this McGraw-Hill report. I look forward to reading future reports by Mike.

nice

alexg — Mon, 04 Feb 2008 12:07:15 -0500

one of the better write ups I have seen on VIN. Great Job!

http://www.contrarianvalueinvesting.com/

Where is the Value in WAMU?

Nick — Sun, 25 Nov 2007 12:07:20 -0500

I haven't looked too deeply into WAMU (WM) since last year but, I'd be shocked if you couldn't find a better Bank to be investing in. I posted this on Motley Fool CAPS last December and the only thing that has changed in my mind is a 50% reduction in price and I still don't see the value:

"[Washington Mutual has a] weak Home Mortgage portfolio and with the second stage of the housing crash just starting the foreclosures will start mounting up. That and a poorly executed expansion in retail banking will eat into its bottom line. Look out below. The only way this is on the way up is if its bought out." -12/22/06

Where do you see the value? Where do you see the value relative to other financials or banks? If you had to sum up their competitive advantage what would it be? This isn't an unregulated toll bridge where they can raise prices at will. Their advantage is "Free, Free, Free" would their customers leave if they raised prices? Is their cost of capital lower than other banks? I admit that their dividend yield and P/E are very attractive, but I bet with a little patience you could buy CITI or another Bank at a similarly attractive valuation. Buffett likes banks and he chooses to buy WFC, BAC, and USB. What do you see that he doesn't? Maybe the $15B market cap is too small for Buffett?

This year there will be many acquisitions and I do think that this could be a great play if they are bought out. I am very interested in your response. I'm not a fan of WAMU, but I might have missed something and I would hate to miss the 11% yield based on my bias. Let me know what you see.

Disclosure: I work for a bank and WAMU is a major competitor. Unfortunately I didn't short WAMU and have no position in their stock.

Re: McGraw-Hill

George — Sun, 25 Nov 2007 10:17:40 -0500

McGraw-Hill owns Standard & Poors. A large part of the Standard & Poors business involves debt rating. It's the same business as Moody's. Both companies face potential litigation as a result of generous ratings to blended debt securities (CDOs, etc.). The market for debt rating services has also slowed down.

On another note, there is ever increasing competition in indexes. It seems like someone is coming up with a new index every day.

Regardless of these factors, I still believe McGraw-Hill has a wide economic moat and will be producing excess profits for years to come. The real question is whether the stock now trades low enough to provide a significant margin of safety.

The thing that concerns me

Ryan McParlan — Sat, 24 Nov 2007 22:42:30 -0500

The thing that concerns me is why is Mcgraw-hill so sold off. Am i missing something? Are students not going to class any more?

Re: WAMU

George — Sat, 24 Nov 2007 18:31:32 -0500

I'm very sceptical that Washington Mutual has really changed the way banks do business. How have they made banking fun? The only fun aspect of their banking I've experienced is their expensive advertising campaigns. Good marketing does not constitute a change in the way banking works.

WAMU

Teenvestor — Sat, 24 Nov 2007 12:51:49 -0500

Washington Mutual is a great bank one that has changed the way banks do business by making banking fun.

It's a good comapny, management has been there for a while and it has fallen off a cliff recently, the other banks you mentioned may be great companies but I don't know how undervalued they are, banks usually have low PEs.

This is a contrarian play, buying at the height of fear in the company, Morningstar says its value is $51 and it's trading for $18.