Value Investing Challenge Winner: Long Ashland (ASH)

We're posting up notes from the 2013 Value Investing Congress in New York.  Next up is the Value Investing Challenge winner.  Daniel Lawrence of Elmrox Investment Group pitched Ashland (ASH) as a long.


Daniel Lawrence's Value Investing Congress Presentation

Long Ashland (ASH)

Specialty chemical company.

"Misunderstood transformation with significant upside and catalysts."

Used to be commodity chemicals company, and is now a specialty chemical company.  Street is not valuing it for that yet.  Says stock doubles from here.

Owns Valvoline- he says high barrier to entry, but low maintenance CAPEX, less than 2% of sales.

Product portfolio is differentiated, high loyalty rates by consumers.  Market giving no credit for Valvoline, effectively getting it "for free."

Says multiple expansion as market recognizes the transformation.

Why it's cheap?  Street thinks they will make more big acquisitions.  Oil exposure, weak cash flow, underfunded pension. 

Be sure to check out the rest of the presentations from the Value Investing Congress here.

Value Investing Challenge Runner-Up: Short LifeLock (LOCK)

We're posting up notes from the 2013 Value Investing Congress in New York.  Next up is the runner-up in the Value Investing Challenge competition.  David Swartz of Pacific West Land pitched a short: Life Lock (LOCK).


David Swartz's Value Investing Congress Presentation

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Short Life Lock (LOCK)

Claims to protect against identity theft.  He says they are misrepresenting their ability to protect against identity theft.  Weak product, not useful, basic product, 73% of members, doesn't even do credit report checks.  $10/month basic service has no credit monitor.

 

One of the founders had his identity stolen several times.  Own father accused him of using his AMEX to run up $150k in charges.  Name does not even appear in Life Lock’s prospectus.  Bankruptcies, lawsuits, failed businesses, etc.

 

The very origin of the company is a fiction.  CEO: Todd Davis, co-founder.  Put his own SSN in ads, his identity has been used in 13 separate incidents.  He's been selling stock every month. 

LOCK just bought ID Analytics, paid $186M in cash, for 7x revenue.  Business is unprofitable. 

LOCK has $1.3B market cap, 22x BV, 38x P/E forward eps.  Spending $170M on sales and marketing.  Has a public comp, INTX.  Its TEV/sub is only $39 vs. LOCK of $393. 

Price target: $5.

Be sure to check out the other presentations from the New York VIC here.