Regarding Nestle stock, I wonder if I confuse “because of” with “in spite of.” In the past, I’ve written about how Nestle is one of the top businesses in the world, and is an exceptional treat investors because it nearly always trades in close proximity to its fair value range. Some businesses, like Emerson Electric and Cisco and Aflac, are especially reliant on the question “At what price did you buy it?” Others, like Colgate-Palmolive or Berkshire Hathaway or Nestle, are much more responsive to the question “Well, how long have you held it?”
Considering that other food companies, like Kellogg and Smucker, tend to get overvalued during investor “flights to safety”, you may wonder why Nestle is nearly always a fair deal for investors at nearly any given time.
Today, investors that purchased their Nestle stock through the CitiBank-facilitated stock offering received their dividend today–if you’re an ADR holder, … Read the rest of this article!
“Time is the friend of the wonderful business.” The spirit of that famous sentence should be part of the touchstone inquiry before ever contemplating any type of investment. If you are sure that the asset you purchase will be selling more goods or services ten years from now at higher prices, and thereby earning more profits, you’re already well on the path to investment success. The only remaining impediments to watch out for are (1) overpaying and (2) buying something with an over-leveraged balance sheet.
I had this on my mind when I observed much of the attention the investor community is giving to the called-off merger between Office Depot (ODP) and Staples (SPLS). If you are investing with a 5+ year time horizon, you should be living your life as if these companies don’t exist.
These are both companies that, over the long term, will eventually experience some type … Read the rest of this article!
Remember when Peter Lynch warned us in his book “One Up On Wall Street” that mom and pop investors get into big trouble when they buy stock in familiar names at a cyclical high? The specific example he gave was Ford Motor (F), which is the type of household name that catches the attention of new stock market participants after they’re no longer scared by the previous recession. These people start to see some of their friends buy new cars, and they catch snippets on CNBC about the market hitting new highs. They want in on the action. And so they buy the stock.
Within a year or three, the business cycle turns, earnings fall, and the stock price gets hammered as it shifts from selling at a premium to selling at a discount. It’s a very seductive type of business mistake for people that have generally sunny and optimistic … Read the rest of this article!
Mark Zuckerberg wants Facebook to create a Class C of stock (a third class class in the capitalization structure) with non-voting rights so that he can sell billions of dollars worth of FB stock in the coming years so that he can maintain the 60% voting power in Facebook that will effectively allow him to personally keep control of Facebook even while gradually draining his equity investment in the social media corporation.
Facebook shareholders Eric McGinty and Eric Levy separately launched class action lawsuits two days after the April 27th Class C stock announcement alleging that Zuckerberg and the Facebook Board of Directors violated their fiduciary duty of loyalty to the shareholders by engaging in a conflict of interest transaction that gives Zuckerberg the benefit of entrenchment without giving the adversely affected voting rights of the remaining shareholders the benefit of a bargain. The reason why it is a class … Read the rest of this article!
Termination fees, in the event a planned merger or acquisition fails to consummate, is a fascinating topic that’s long been heavily litigated in Delaware courts where 52% of publicly held corporations are incorporated. Sometimes they are used to offset the time and resources involved in negotiations, and even add credibility to merger offers, and other times, they are used by corporations that put themselves up for sale to lure in an initial acquirer if it looks like an auction involving other bidders will soon follow.
The reason why I have yet to discuss break-up fees is because they almost never affect the medium-term thesis, yet alone the long-term thesis, for buying stock in a company.
Remember that Allergan-Pfizer merger that got abandoned a few weeks ago? The break-up fee in the merger agreement called for Pfizer to pay Allergan $400 million if the deal didn’t go through.
That’s nice, but … Read the rest of this article!