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Helen of Troy Limited Message Board

  • aintskeared aintskeared Mar 22, 2006 3:15 PM Flag


    The short rec came from Stephen Leeb ("The Complete Investor"). His stock picks are a mixed bag but he's got a decent track record on his short positions. Here's the complete text of his discussion of HELE:

    "Helen of Troy, our second new short,
    epitomizes another kind of value trap: a
    company whose low P/E may make it
    appear undervalued but that keeps missing
    its growth targets. Earnings have consistently
    come in below management�s guidance, a
    sign either that the company has problems
    outside management�s control or, even
    worse, that management doesn�t see or
    understand the problems it faces.

    "The company makes hair dryers, curling
    irons, and other personal care products.
    Management attributes its earnings decline
    mainly to lower personal care sales (an
    arena in which it competes with the likes of
    Procter & Gamble) and higher expenses
    as well as a challenging consumer environment.

    "It�s true that higher oil prices have
    dampened consumer spending. But we
    think the company�s problems run deeper.
    For one thing, the market for its various hair
    care and other products is a mature one,
    especially given that Helen of Troy operates
    mainly within the U.S., meaning its sources
    of future growth are very limited. For another,
    it�s trying to market several competing
    brands of the same kinds of products at the
    same time, always a tricky prospect. In addition, its products are sold largely through
    mass retailers�Wal-Mart is its biggest customer, accounting for about 20 percent of
    sales�and are priced as commodities.

    "The company may try to continue to
    aggressively acquire other brands and even
    companies. If so, its stock price is likely to
    suffer. And if earnings continue to shrink,
    the stock price will suffer even more. In
    sum, while at its current P/E the stock
    may seem like a bargain, it isn�t, and
    we advise selling Helen of Troy short."

    I shorted the stock.

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