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Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 51  
Subject: Why Collective Brands? Date: 1/18/2008 10:56 AM
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Why did I buy Collective Brands?

I have been watching this, relatively local, Topeka, Kansas Company ever since they bid $20.50 cash in May 2007 for the Stride-Rite shares I paid $15 per share for in April 2007.

When I bought Stride-Rite(SRR) at $15 in April 2007, my plan was to wait for the next Bear Market, maybe 2008 or 2009, and buy more Stride-Rite shares at $8 when the company is really worth about $32 per share by my estimate.

Payless Shoe Source(PSS) also must have figured that Stride-Rite was worth $32 as well, so they bid for the whole company at $20.50.

Any company that is smart enough to buy high quality brands like Stride-Rite(R), and Sperry Topsiders(R), for $20.50 when they are really worth $32 has a smart management that I want to ride-along with as an owner of Collective Brands stock.

Collective Brands essential facts:

Price: $17.15
52-Week High: $37.20
52-Week Low: $14.84
Institutional Ownership: 78.6%
P/E Ratio: 10.0
EPS: $1.73
Sales: $2.951 Billion
Market Cap. $1.123 Billion
Mkt.Cap./Sales: 0.38
Return on Equity: 15.3%
Debt/Equity Ratio: 1.17
Book Value/Share: 12.12
Price/BV: 1.42
Analyst Consensus: Hold <they are WRONG!>
Web Site: http://www.collectiveBrands.com
Industry: Apparel Stores (Shoes)
Earnings Estimates: FY(1/08) $1.24, FY1/09 $1.81
Earnings Growth Rates: Last 5-Yrs. 1.6% Company; 15% Industry

Investment Thesis: Recent, mid-2005, new Management from Nike Corporation (Matt Rubel) will improve corporate performance and maximize strong Brand Equity currently existing and acquired acquired with Stride Rite(SRR)Sperry Topsiders(R). Goldman Sachs Investment Management recently (May 2007) acquired over ten percent (10.4%) (Kansas City Star, Friday May 11, 2007, Jennifer Mann. C1) of the company. See also, KahunaCFA's Investment Musings post #58.

Summary: Reasonable Valuation, Stable Recession resistant product line (shoes), Catalysts: New Management(2005), Stride Rite acquisition,(May 2007) and a potential activist 10.4% investor, Goldman Sachs Investment Management. Intrinsic Value $66-$70 per share. <My opinion>.

Kahuna,CFA
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