Joe Koester On His Top Value Stock (Which Doubled In A few months)

Dear ValueWalk Reader, We thought you would be interested in an excerpt from our [latest issue of HiddenValueStocks]( update a deep dive into a total under the radar pick (on the LSE with no analyst coverage) from Joe Koester of Boyles Asset Management. The stock on the LSE more than doubled just a few months after we sent the idea to investors on October 7th 2016. Those gains could have been yours, on average [the picks are up 23%]( (not a backtest), [Find that issue and more here](. Update on the thesis below. We asked Joe Koster of Boyles Asset Management for an update on his thesis for the company', which was, until a few weeks ago one of the[best performers of the Hidden Value Stocks portfolio](. Since the beginning of June, the shares have been on a steady downtrend and lost around a third of their value in a single day in mid-August after the company issued a profit warning. Below Joe explains why he still likes the company and why, after recent declines, the shares might offer value. These slowdowns tend to happen from time to time. In company'1's case, the last big one happened in 2012 where, after having a great first half of the year, the usual end-of-year work in November and December didn't happen (and for reference, the share price took a dive from about XXXX to about XXXX over a couple of week period). While parts of company's business have become more steady and recurring, much of it still depends on marketing budgets, which even among the larger, well-known consumer brands, can occasionally be lumpy. After going through the transcripts of a few of the company's customers, I think this excerpt below from Unilever, one of the company's bigger customers, pretty much explains the reasons for the quick slowdown (Unilever had added pressure this year as well after the talks of the potential bid from 3G, which ended up not materializing, but put pressure on them to be more efficient): "In brand and marketing investment, we have delivered more than XXXX million of savings through Zero Based Budgeting. ZBB is helping us to reduce wasted investment, to drive efficiencies and to improve effectiveness. Let me give you just a few examples. Our analysis shows that we were producing too many new pieces of advertising. More than 95% of our advertising films were being replaced before they had reached their maximum effectiveness. Now this created a lot of wasted work, both internally and for our agencies. And by managing this better and running films for longer, we -- our spend is down in agencies by about 17% in the first half. At the same time, by looking more closely and creatively at the costs associated with producing a new asset, we find savings opportunities, so we're now using a wider set of production houses in some lower-cost locations. This has helped us to reduce average cost per film by 14%." WPP also mentioned the marketing/advertising cuts among the big consumer-goods companies in their latest call. For company's, all of the above is both a near-term threat as well as a long-term opportunity. John ........ ( the company''s founder and CEO) has been saying over the last couple of years that market research will be changing more in the next 10 years than it has in the last 100, and on that side of things, even though they are still fairly small, they are well-known and have the track record to take market share if that ends up being true, especially since they have been so vocal about what needs to change. On the advertising side of things, they also saw a better way to do things and so have launched their own ad agency over the last year or two. If companies are serious about focusing on quality advertising and not just quantity, then having the market research tools to test ads before giving them to clients may help them get their ad agency off the ground a little quicker, but to be sure, this business is still a start-up, and some of costs to scale that up a bit as well as the investments to scale a growing business which failed to grow in the first half of the year is what has caused the profit drop. But the company still believes these are the right long-term investments, so hopefully this "capacity to suffer" the near term hit to earnings leads to good returns on those investments. [Find out more here]( [Boyles]( [Hiden Value Stocks In 90 Seconds]( [Video]( While the market seems to think management at the company is also a little optimistic on their second half of year profit estimate, there are some signs for hope that things will pick up. Getting back to a few excerpts from the July Unilever call: "Underlying operating margin was up by 180 basis points after a reinvestment of about half of the growth savings generated. The accelerated delivery of savings will allow a higher level of reinvestment, particularly in brands and marketing in the second half of the year. This will support an innovation plan, which is somewhat back-weighted this year, particularly in Personal Care." "And it's also in Personal Care that we see the innovation and marketing plan for the year to be most backweighted. We therefore expect a significant step up in brand and marketing investment in the second half and an acceleration of volumes." ... "Brand and marketing investment was lower than last year by 130 basis points. There are 2 main reasons for this. Firstly, the strong and fast delivery of savings and productivity gains from ZBB; and secondly, a back half-weighted innovation plan this year, particularly in Personal Care, as we focused on getting the new ZZZZ fully up and running in the first half. With the planned step-up in the second half, we expect brand and marketing investment in absolute terms to be maintained at or around last year's levels." Pinning down a precise valuation is always going to be tough for company until they get much bigger and things get slightly more predictable. But given the people, culture, and balance sheet, I think anything in ‎XXXX to XXXX range is a reasonable buy, as I think they'll be back earning more than their peak from last year (XXXX per share) in the future....but whether that happens in six months or five years I think is hard to tell. But all in all, I think the stock was a little dear in the XXXX to XXXX range, and would be very cheap in the XXXX range, so down where it is now, I expect a good return with the potential for a great return if they accomplish their goals. To read the rest of this interview [click here for our 7 day trial](. Hurry, to check it out with a free trial before the price increase on October 31st 2017. If you have any questions contact Jacob Wolinsky or Rupert Hagraves at support@valuewalk.com All rights reserved. All materials in this email are protected by United States and international copyright and other applicable laws. All us requires the prior explicit written permission by ValueWalk. DISCLAIMER. This data is provided for informational purposes only and is not intended for trading purposes. This document shall not constitute an offering of any security, product, or service. 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