The Value Investing Congress held its annual challenge
soliciting investment ideas from investors all over the country.
This afternoon, the top two finishers in this year's challenge
presented their idea.
In reverse order of finish, those value investment ideas
David Swartz of Pacific West Land in Seattle
an identity theft protection company.
In Swartz's estimation, the company has many flaws: too
dependent on a network of data, dozens of similar competitors, a
very basic product. The company also offers a $1 million
"guarantee", which doesn't actually guarantee anything.
In 2008, Experian sued LifeLock for fraud, and in May 2009 a
judge ruled that the company's primary business activity is
illegal. Ironically, one of LifeLock's founders was actually a
victim of identity theft himself - a point that drew several
laughs from the Value Investing Congress crowd.
Another founder, Todd Davis, has 13 accounts of fraud listed
against his name.
The financials aren't pretty either. The company accumulated a
deficit of more than $200 million before its IPO in early 2012.
Its problems run so deep that the FTC has actually gone after the
The stock currently trades at $14 a share. Swartz thinks it's
worth more like $5 a share.
Daniel Lawrence, Elmrox Investment Group
a global leader in specialty chemicals.
Lawrence, this year's grand prize winner, thinks the company
is vastly misunderstood. For one, it's valued as a commodity
chemicals, not specialty chemicals, business.
What's the difference, you ask? According to Lawrence,
specialty chemicals is more of a growth business. The balance
sheet is strong with plenty of liquidity. Ashland also has a long
history of capital allocation.
Its water business is a leading provider of specialty
chemicals to water-intensive industries. Its Valvoline oil change
store is also one of the dominant presences in its sector in the
U.S. However, the current share price doesn't factor in
Ashland's Valvoline business - worth between $3 billion to $5
The Volvoline brand is so strong, Lawrence believes, that it
could be a stand-alone MLF on its own - possibly worth as much as
Right now, Ashland only trades at 7 times estimated 2014
earnings. Thus far, the market hasn't recognized the company's
transformation from the low-margin commodity chemical business to
its current specialty chemical business.
Even near all-time highs at $92 a share, Lawrence thinks
Ashland remains undervalued at current prices.