Mattel’s stock hadn’t been on my radar in quite some time, because I thought it too expensive. The stock has been getting slammed in 2014, down about 24% year to date. Obviously, it has underperformed the S&P 500 by a wide margin. Clearly, it’s not wise to buy a company’s stock just because it’s down sharply……..but as Warren Buffett likes to say, the new low list “is a great pond to go fishing in”.
Typically, purchases for my portfolios fall into one of two categories. Either they are “cigar butt stocks ” (marginal businesses that are selling for less than their liquidation value or working capital), or they are powerful global brands such as our holdings in Coca-Cola or Johnson & Johnson which I like to hold in perpetuity. My recent purchase of Mattel’s stock was a play on their powerful brands. This purchase was relatively small because I believe the share price will go lower, along with the broader market, and I hope to buy many more shares. When the long awaited correction will come to the broader market is anyone’s guess, but Mattel’s shares appear to represent a good relative value compared to the broader S&P 500. Click HERE to read my complete valuation article on Seeking Alpha.
A Few Quotes to Learn By
Additionally, I’d like to share two quotes from Warren Buffett that I think succinctly explain how he feels about a given company’s management, and why he handles his managers the way he does.
“Whenever I read about some company undertaking a cost-cutting program, I know it’s not a company that really knows what costs are all about. Spurts don’t work in this area. The really good manager does not wake up in the morning and say, ‘This is the day I’m going to cut costs,’ any more than he wakes up and decides to practice breathing.” ~ Warren Buffett from Carol Loomis’ 1988 article The Inside Story of Warren Buffett.
“….We don’t go into companies with the thought of effecting a lot of change. That doesn’t work any better in business than it does in marriage.” ~ Warren Buffett from Carol Loomis’ 1988 article The Wisdom of Salomon?
Warren Buffett is highly praised as an investor, but in my opinion he doesn’t get enough credit for being a great manager. Part of what makes him a great manager is that he delegates responsibilities and then supports the managers that are in charge. It doesn’t always work out, of course, but there is something to be said for a manager who is confident enough in themselves to delegate. In my opinion the best managers also “ read/understand” people extremely well. Here too Buffett seems to get high marks.
What are your thoughts on Buffett’s “hands off” management style? Do any other married folks out there read true brilliance in the second quote…..at least when it comes to marriage?