Tuesday, May 23, 2017

Akzo, PPG and "superinvestor" Tweedy, Browne

Tweedy, Browne is a value investing fund. Warren Buffett mentioned the company in one of his speeches: https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors Two weeks ago, Tweedy, Browne sent a letter to Antony Burgmans. the Chairman of the Supervisory Board of Akzo Nobel. They want Akzo to accept the PPG buyout offer of 96,75 Euros shown below: 

The letter starts as follows:
"Dear Mr. Burgmans,
Tweedy, Browne has owned shares in Akzo Nobel since 1992, and we think we brought patience and a long-term perspective to our investment. Being shareholders for 25 years has unfortunately not been a fruitful experience and our patience is wearing thin. In our calculations, the growth of the value of each Akzo Nobel share hardly held up with inflation. The reason to stay invested was continuous undervaluation; holding on was both rational and disappointing. Had we bought "reasonably priced" PPG (NYSE:PPG) shares instead of "cheap" Akzo Nobel shares in 1992, the people who have entrusted their savings and pensions to us would today have 50% more money."
They mention buying Akzo Nobel in 1993, I can't find the stock price they paid, but on Gurufocus I found the data to calculate Graham Value. It has increased by 2,5x since 1993 and Akzo has been paying dividends.
PPG's has also been paying dividends, but its Graham Number has increased much more than Akzo from $10 to $40 = 4x.    

The PPG stock price was much higher than the Graham Number in 1993 and unlike Akzo they're hasn't been much overlap between the 2. In other words PPG stock has not been "cheap" by traditional value investing metrics, but in the long term owning a part of the company has been a relatively good investment.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

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