Jeff Stacey, CFA, is the Founder and Portfolio Manager for Stacey Muirhead.
- Investment Process
- Global Reach
- Independent research (stock pickers)
- Concentrated (10-20 positions)
- Unconstrained (sector, size, arbitrage, distressed debt)
- Absolute return focus
- Long term horizon (10 years)
- Main emphasis on long term holdings
- Secondary emphasis on arbitrage, high yield, cash
- Long Term Holdings
- Cigar Butts & Good Businesses (Buffett/Munger)
- Outstanding business economy?
- Honest & capable management?
- Attractive price?
- “Great people, Great business, Great price”
- Cigar Butts & Good Businesses (Buffett/Munger)
- Example Reckitt Benckiser Group Plc (LON:RB)
United Kingdom- Non-Core holdings (Frank’s Hot Dogs & French’s Mustard) potential spinoff/sell
- Hi ROE 30%+
- Strong Balance Sheet $6B equity/$1.7B debt
- Attractive Operating & Net Margins
- Significant brand recognition
- Growing revenues & earnings power over time (double digits)
- Consistent FCF generation
- Solid record since merger in 1999
- Revenue $3B to $9B (10% CAGR)
- Net Income $200M to $1.8B (20% CAGR)
- Solid Brands – Five #1’s worldwide
- Management
- Rakeesh Kapoor new CEO after Bart Becht stepped down in the past year
- Management required to own certain amount of shares (over £100M currently)
- Incentives linked to tangible performance targets based on EPS growth
- Price – £31 March 2011
- P/E 12.5x after adjustments for acquisition
- Dividend yield 3.7%
- Substantial Food & Pharma Businesses that were non-core
- Buy opportunity – down 16% in 3 months
- Risks
- Raw material cost increase
- Retailer consolidation
- Private label products (steady at 20% of category)
- Margin expansion (continue?) – believe room in emerging markets
- Ability to scale globally
- Generic competition in Pharma business
- Q&A
- Risk with Canada & currencies?
- Yes, Canada dollar high & has hurt for 5 years
- Risk with Canada & currencies?
- R&D component?
- More in system innovations than in new product development
- Evaluating attractive vs. unattractive: tipping point?
- Estimate fair value & look for more appealing options
- Not exact – part art
Value Investor Conference: Omaha, Nebraska – May 4rd, 2012
Dustin Hunter, SunRift Capital Partners (www.sunriftcp.com)
(These notes are to the best of my recollection and trusty ink pen. Discrepancies are due to my error in understanding & transcribing.)
