I wrote a piece on watchmaker Movado Group (MOV) for John Mihaljevic’s wonderful Manual of Ideas issue on Deep Value. Download it by clicking here or the cover below:
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I’ve just bought Fossil Group Inc. Not really a ‘deep value’ play, I think its c.40% undervalued based on the present value of the next 15 years owner earnings discounted to the present value (assuming no growth at all).
I think the market is massively over bearish with regards to the affect of the Apple Watch and the decreases in Q2 2015 revenues v. Q2 2014. Reading the 10Q, one can see that these are caused by currency fluctuations and that underlying sales are actually increasing.
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Just curious, Don’t you think predicting 15 years in the future is a little absurd?
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Not really. Its quite conservative when taken in the context of some valuation models which use ‘terminal value’ i.e. in to forever.
It depends on whether you think the business will still be around generating the same return (owner earnings) in 15 years. It assumes no growth at all, which many valuations do, therefore its quite conservative.
Also, there is a margin of safety. The current price is a 40% discount to the above.
I’ve written an article on this valuation on Seeking Alpha if you’re interested.
http://seekingalpha.com/article/2793185-buffett-financial-analysis-template-coca-cola
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Nice Call Tobias! Stock is up over 20%… If I ever see you in person ill buy you a beer!
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Ha. Thank you. It’s very early days. Plenty of room left in this one.
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Tobias,
Thanks very much for leading me on to Movado Group. I have just invested today at a market cap of c.$500m. Its hard not to invest when equity is at c.$460m, $400m of which is current. Throw in annual “owner earnings” of c.$50m+ and its difficult to see how one can lose.
Regards
MIke
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Thanks, Mike! It’s still very cheap.
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It went up 20% literally the day after I bought it. Thanks again for bringing it to my attention.
More please! :)
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when talking about the cash amount you say “MOV has a market capitalization of $593 million at its $24.61 share price at the time of writing. It has $159 million in net cash on its balance sheet,”
When I cracked open the latest 10Q and go into the footnotes, It says “Cash at April 30, 2015 amounted to $185.8 million compared to $137.8 million at April 30, 2014. The increase in cash is primarily the result of proceeds from the maturity of a short-term investment, cash provided by operating activities and available-for-sale securities, partially offset by cash used in stock repurchases, the payment of dividends, capital expenditures and a long-term investment.”
It says they have 185.8 M in cash, how did you get to $159M in cash?
Am I missing something here?
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$159 in net cash. $185 million in cash less $25 million in short-term debt and $2 million in minorities.
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[…] Greenbackd with an analysis of a deep value stock, watch maker Movado […]
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Thanks Tobias… Very interesting!! What do you think of swatch? Its another great watch company that the stock price fell of a cliff resently
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Swatch is excellent. We covered it in Singular Diligence: http://singulardiligence.com/the-swatch-group-sa-vtxuhr/
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