Meryl Witmer is a general partner at Eagle Capital Partners. She previously worked at Mutual Series with Max Heine and Michael Price.
The speaker is introduced by her son who has cancer. ‘
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The fund looks for good management teams who are good allocators of capital. Companies that generate real cash flows and have strong balance sheets are requirements.
Gildan Activewear Inc. (NYSE:GIL) (TSE:GIL) passes this bill. It makes socks, T-shirts. They buy yarn and convert it by machine to fabric and then turn it into clothing.
The speaker wartns not to trust people who say they personally own the stock.
Gildan is dominant and vertically intergrated. The co-founder owns 8% of the shares, and the earnings are currently depressed as cotton prices spiked in 2011.
GIL is trading at less than 10x 2013 estimates of after tax free cash flow.
They will be debt free shortly.
Since 1998, Gildan has increased its market share from under 10% to 70%.
The NIKE, Inc. (NYSE:NKE) shirt which many people wear and pay $40 costs them $2. In the recent issue of Graham and Doddsville, Tom Russo mentioned the capacity to suffer. Gildan thinks like owners and spent a large amount of money to add to their capacity.
Their next market is national account, selling to The Walt Disney Company (NYSE:DIS) , Nike and Rebox.
The acquisition of Anvil will help sell to the companies mentioned and large retailers like Walmart (NYSE:WMT).
The share price is currently depressed, and lowered costs to customers to maintain good relationships as cotton prices increased.
Gildan has some catalysts as they move towards more branded goods, and its new facility in Bangladesh.
The intrinsic value using a 2013 model assumes no margin expansion and a target price of $50, a double of the current price. The company could pay out $2.50 a share and have a 5.5% yield
Viacom, Inc. (NASDAQ:VIAB) (NASDAQ:VIA) was revealed as a new holding of Warren Buffet’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) yesterday. The company has two core segments. Media networks like Nick, MTV, BET, Spike, CMT. It generates revenues mostly from advertising an affiliate sales.
Its films are a smaller segment of the revenue.
Viacom has a big cloud as Nickelodeon ratings have gone down over 20% year over year according to Nielsen.
Nickelodeon is a great place to advertise for kids below X-mas, and Viacom has the pricing power to increase the advertising revenue, even if Nickelodeon revenue increases.
The company plans to return $20 billion in buybacks and dividends over the next five years, compared to a market cap of $25 billion.
The model assumes an increase in affiliate fees, using assumptions more conservative than the company’s. 2015 EPS should be $6.72 and $6 with no growth. With a 14x multiple its worth $80-90 a share, even with the current multiple there will be a 20% annual return based on earnings growth.