(B)(N) HELE Helen of Troy Limited

Courtesy: Helen of Troy Limited

Deal Book. Helen of Troy, the firm of El Paso, Texas, is under siege again and the suitor is the activist shareholder Sachem Capital Partners LLC which has a 3.7% ($60 million) stake in the $2 billion company.

We don’t know how many pots and pans and Oxo™ cheese graters Sachem has sold this year but Mr. Ferguson is the head chef at Sachem and a recent protégé of Mr. William (Bill) Ackman of Pershing Square Capital Management LP, and he has a plan and if the plan is successful, other shareholders, possibly new ones, will unlock their wealth and pay him $6 million or so for gratuitously suggesting it (The Wall Street Journal, February 5, 2014, Helen of Troy Limited Comments on Letter from Sachem Head).

He’s also in a hurry because Helen of Troy does not pay dividends and another hedge fund might suggest that America is moving towards holographic foods and short the stock.

We’ve seen this before and we know how it ends.

We’ve seen this before and we know how it ends. And we don’t see it as a pleasant business activity in which everybody wins despite the billet-doux. The point of taking a “position” is to excite and seduce the shareholders into giving up their proxies, and to intimidate the managers and board of directors into precipitous and non-intuitive actions.

So, let us supply some logic and look at the fundamentals. Please see Exhibit 1 below.

Exhibit 1: Helen of Troy et al – Fundamentals – February 2014

Helen of Troy et al – Fundamentals – February 2014

The Undervalued Helen of Troy et al – February 2014

And, indeed, these companies are “undervalued” but not because there is even more value to “unlock” in due course but because they provide too much of it already.

The purveyors of household products returned 36% on the shareholders equity last year and paid $1.6 billion in dividends for a 53% return of earnings and 2.6% dividend yield to the shareholders.

And the aggregate value of their stocks is up $13.6 billion and +28% since December 2012, and another $1.1 billion and +2% so far this year.

Needless to say, three of them have been in the Perpetual Bond™ for a long time, since much lower prices, and Helen of Troy has also entered that vaunted and intimidating arena last year. The chart below (Exhibit 4) shows that Helen of Troy is “undervalued” and could expect to succeed with a “rights offering” if it were so inclined. Please see the Exhibits 2 through 4 below.

Exhibit 2: (B)(N) Helen of Troy et al – Prices & Portfolio – February 2014

(B)(N) Helen of Troy et al – Prices & Portfolio – February 2014

Exhibit 3: (B)(N) Helen of Troy et al – Portfolio & Cash Flow Summary – February 2014

(B)(N) Helen of Troy et al – Portfolio & Cash Flow Summary – February 2014

Exhibit 4: (B)(N) HELE Helen of Troy Limited – Risk Price Chart

(B)(N) HELE Helen of Troy Limited – Risk Price Chart

Helen of Troy Limited is a designer, developer, importer, marketer and distributor of an expanding portfolio of brand-name consumer products. It has three segments: Personal Care, Housewares and Healthcare / Home Environment.

(Please Click on the Chart to make it larger if required.)

From the Company: Helen of Troy Limited, together with its subsidiaries, designs, develops, imports, markets, and distributes brand-name household, personal care, and healthcare/home environment consumer products in the United States, Canada, Europe, Latin America, and internationally. It operates in three segments: Personal Care, Housewares, and Healthcare/Home Environment. The Personal Care segment offers curling irons, straightening irons, hot air brushes, hand-held dryers, hard and soft-bonnet hair dryers, hair setters, facial care appliances, foot care appliances, hair clippers and trimmers, hand held and lighted mirrors, hair brushes, hair styling implements, decorative hair accessories, liquid hair styling products, conditioners, shampoos, liquid and/or medicated skin care products, fragrances, deodorants, and antiperspirants. The Housewares segment provides food preparation tools and gadgets, food storage containers, cutlery, household cleaning tools, trash cans, bathroom accessories, storage and organization products, and baby and toddler care products. The Healthcare/Home Environment segment offers thermometers, blood pressure monitors, humidifiers, heating pads, and hot/cold wraps; faucet mount water filtration systems, pitcher based water filtration systems, and refrigerator filters; and air purifiers, heaters, fans, humidifiers, dehumidifiers, and bug zappers. The company sells its products primarily through mass merchandisers, drugstore chains, warehouse clubs, catalogs, grocery stores, specialty stores, home improvement stores, beauty supply retailers, e-commerce retailers, wholesalers, and various types of distributors, as well as directly online to end user consumers. Helen of Troy Limited was founded in 1968, has 1,500 employees and is headquartered in El Paso, Texas.

For more information on the chart elements and additional references to the theory, please see our Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.