Mars to Buy Wrigley
Posted by Eddy Elfenbein on April 28th, 2008 at 10:32 am

This is a blockbuster deal in the candy world. Mars, the private candy company, is buying Wrigley (WWY) for $23 billion. Shareholders of WWY will get $80 a share in cash. That’s a nice 28% premium over Friday’s close. Mars is perhaps one of the last, very large privately held companies.
I’ve been a long-time fan of Wrigley and it’s one of the classic stocks on the market. It has a simple, easy-to-understand business. The company is well run, and the stock has a great long-term track record.
As I’ve said many times, investors often make a mistake with investing by looking for a stock that’s trying to invent the seventh dimension. You really don’t need to do that. One of the best ways to invest is to find a solid, stable stock that has churned out earnings year after year.
Twenty-five years ago, shares of WWY were going for about $1 (adjusted for splits). That’s a nice 80-fold return in 25 years, and that doesn’t include a consistently rising dividend. Given Wrigley’s business, it’s probably no surprise that Berkshire Hathaway will be in the deal, providing financing for the purchase.
Andrew Ross Sorkin writes:

Mr. Buffett has a history with iconic food and beverage businesses. He was an early investor in Coca-Cola and is already a candy owner in Sees Candies.

Actually, Buffett didn’t buy Coke (KO) until 1988. I’m not sure if that qualifies as early; it was after the stock had risen a great deal.

Researchers Discover Massive Asshole In Blogosphere
Posted by Eddy Elfenbein on April 28th, 2008 at 8:55 am

The Onion Radio News is on the scene.

How Rare Is a 56-Game Hitting Streak?
Posted by Eddy Elfenbein on April 27th, 2008 at 2:50 pm

Here’s a fascinating article from the NYT looking at the probability of Joe DiMaggio’s 56-game hitting streak. It turns out, a 56-game streak isn’t that improbable. But from Joe D it is.
(Via: Joe Weisenthal)

Sequoia Fund to Reopen to New Money
Posted by Eddy Elfenbein on April 26th, 2008 at 7:20 pm

After 26 year, the legendary Sequoia Fund will reopen.

Since its inception in 1970, Sequoia has returned more than three times that of the S&P 500. An investor who put $1,000 into the fund at inception would today have a little more than $200,000, compared to about $63,000 in an S&P 500 fund, according to Morningstar Inc.
Sequoia’s reopening comes amid a similar move by several other funds, most noticeably the Longleaf Partners Fund, which reopened this year.
Sequoia is managed by New York-based Ruane, Cunniff & Goldfarb Inc., which was co-founded by Mr. Ruane, a friend of Mr. Buffet. In 1970, when Mr. Buffett was liquidating his investment partnership, he advised clients to sign with Sequoia. Mr. Ruane died two years ago, and Mr. Goldfarb became chairmman in 2005.
The fund’s managers hope reopening will infuse fresh blood into its client universe.
They said their shareholders have aged since the fund was closed in 1982, “to the point that attrition has become an issue.” Its assets are down 2.4% at the end of last year, even though the fund had a positive 8.4% return. The S&P 500 was up 5.5% in 2007.

Mississippi John Hurt
Posted by Eddy Elfenbein on April 25th, 2008 at 5:14 pm

SPSS Inc. (SPSS)
Posted by Eddy Elfenbein on April 25th, 2008 at 1:29 pm

My latest at RealMoney.com (paid link) on SPSS Inc. (SPSS).

Arby’s Buying Wendy’s
Posted by Eddy Elfenbein on April 25th, 2008 at 10:51 am

From USA Today:

The owner of Arby’s said Thursday that it is buying Wendy’s International in an all-stock deal worth $2.34 billion after the burger chain’s board rejected at least two earlier offers by the company.
Triarc Companies (TRY), which is owned by billionaire investor Nelson Peltz, will pay about $26.78 a share for the company, which has about 87 million shares outstanding. The price is a premium of 6% from the company’s closing price of $25.32 Wednesday.
Under terms of the deal, shareholders at Wendy’s, the nation’s No. 3 hamburger chain, will receive 4.25 shares of Triarc Class A stock for each share of Wendy’s (WEN) stock they own.
Pam Thomas Farber, 53, daughter of Wendy’s founder Dave Thomas, said the family is devastated by the news.
“It’s a very sad day for Wendy’s, and our family. We just didn’t think this would be the outcome,” she said.

CNBC Anchor Factoid of the Day
Posted by Eddy Elfenbein on April 25th, 2008 at 10:32 am

I never realized that Trish Regan was Miss New Hampshire. She won the talent night at Miss America. Wow, well done Trish!

Is This a Real Car?
Posted by Eddy Elfenbein on April 24th, 2008 at 11:53 am

Or a large Matchbox? I’m not really sure.

Triple-A Failure
Posted by Eddy Elfenbein on April 24th, 2008 at 11:07 am

I’m currently working my way through Roger Lowenstein’s 5,000-word Triple-A Failure in a preview of the Sunday New York Times. I highly recommend it. Here’s the opening:

In 1996, Thomas Friedman, the New York Times columnist, remarked on “The NewsHour With Jim Lehrer” that there were two superpowers in the world — the United States and Moody’s bond-rating service — and it was sometimes unclear which was more powerful. Moody’s was then a private company that rated corporate bonds, but it was, already, spreading its wings into the exotic business of rating securities backed by pools of residential mortgages.
Obscure and dry-seeming as it was, this business offered a certain magic. The magic consisted of turning risky mortgages into investments that would be suitable for investors who would know nothing about the underlying loans. To get why this is impressive, you have to think about all that determines whether a mortgage is safe. Who owns the property? What is his or her income? Bundle hundreds of mortgages into a single security and the questions multiply; no investor could begin to answer them. But suppose the security had a rating. If it were rated triple-A by a firm like Moody’s, then the investor could forget about the underlying mortgages. He wouldn’t need to know what properties were in the pool, only that the pool was triple-A — it was just as safe, in theory, as other triple-A securities.
Over the last decade, Moody’s and its two principal competitors, Standard & Poor’s and Fitch, played this game to perfection — putting what amounted to gold seals on mortgage securities that investors swept up with increasing élan. For the rating agencies, this business was extremely lucrative. Their profits surged, Moody’s in particular: it went public, saw its stock increase sixfold and its earnings grow by 900 percent.
By providing the mortgage industry with an entree to Wall Street, the agencies also transformed what had been among the sleepiest corners of finance. No longer did mortgage banks have to wait 10 or 20 or 30 years to get their money back from homeowners. Now they sold their loans into securitized pools and — their capital thus replenished — wrote new loans at a much quicker pace.
Mortgage volume surged; in 2006, it topped $2.5 trillion. Also, many more mortgages were issued to risky subprime borrowers. Almost all of those subprime loans ended up in securitized pools; indeed, the reason banks were willing to issue so many risky loans is that they could fob them off on Wall Street.