Wednesday, May 30, 2012

Pep Boys

Things have not been going well lately for Manny, Moe, and Jack.

The Pep Boys (ticker PBY) have not been meeting Wall Street targets for some time.  A deal to sell the company to the Gores Group fell through to much embarrassment.

The stock has been crushed by investors, losing 25% of its value today alone.  The stock closed today at $8.89 per share.

All this makes this automobile maintenance chain a natural investment for me.  I'm a huge bull on this stock going forward.  I view the current share price of $8.89 an infinite call on the company's common stock.  To me, these are the perfect investments no matter what happens next, win or lose.

The loss is clearly defined in advance and the upside has major potential.

So why do I like the Pep Boys?

PBY has lots of real estate.  Nearly $12 a share in real estate.  Here are some of Pep Boys current sales listings to give you some idea of what they own.  Just imagine lots of their stores. 

Plus $1 a share in cash with no great cash burn ahead.

Plus the company just got a $50 million breakup fee from Gores.

Plus the average age of an American car is getting older.  Believe it or not, the current average is over eleven years.  Someone has to fix all those old cars, put new tires and batteries in them, and replace all those mufflers.

Gores offered to pay $15 per share.  Someone will come along with a similar offer.  In the meantime, enjoy the 1.1% dividend yield.  What LEAP call do you know that pays a dividend?

In my way of thinking, if you buy PBY at the current price you get hard assets worth $13 for the purchase price of about $9---AND you get the automobile repair business with 7,000 service bays in 700 locations in 35 states and Puerto Rico for free.

Tuesday, May 29, 2012

Wallace Neff Bubble Houses

Every once in a while comes a just about perfect book, the kind of volume that can make jaded readers like myself feel like a kid again.

NO NAILS, NO LUMBER is the true story of architect Wallace Neff and his Airform bubble homes which he promoted for nearly half a century starting in 1941.

Neff's bubble homes could be constructed in less than two days without a single nail or piece of framing.  These buildings were completely impervious to fire, earthquakes, and hurricanes.  Neff himself created the homes to relieve the global housing crisis and especially saw an opportunity when World War II ended and millions of GIs came home.

Made of nothing more than reinforced concrete sprayed over an inflatable balloon, these homes were cheap to build and fast to erect.  As author Jeffrey Head notes, Neff and others built hundreds of them all over the world for use as homes and other uses including gas stations and grain storage.

I loved this book on every level.  It's elaborate construction details on how these homes were erected will appeal to the building nerds among us.  The photos of 1940s and 1950s houses and their interior designs are stunning.  This book is part history lesson, part biography of Neff himself, and most of all, just a lot of fun to read.  Neff was far ahead of his time and this book shows just how far.

This highly illustrated volume has a picture of a bubble house on almost every page, making this more a tiny coffee table book than something an owner should put on a shelf.

Sometimes authors read my book reviews and send me emails in thanks.  I would like to thank Mr. Head in advance for writing this book.  He should know that a copy of his book sits on my coffee table at home and virtually everyone who visits picks it up and asks about the bubble houses.  I am writing this article because everyone who sees a bubble house seems to want one.  Ask Madonna.  She's owned one for years.  Actress Diane Keaton also has a thing for original Neff bubble houses.

I honestly can't wait to see one of them!  There are not many left in the United States.  Below is one from Hobes Sound, Florida.  Until I saw this awesome book by Jeffrey Head on a bookshelf, I never knew what a bubble house looked like or heard of Wallace Neff.  Now I can't get enough of either.

Thursday, May 17, 2012

Mortgage Rates Hit Historic Lows

Mortgage rates hit historic lows today...AGAIN...for the third time this week.

At 3.79% you have to go back to 1953 to borrow on the 30-year at that rate.

The recent technical support described as "The Wall" at 3.85% was broken and it's now gone.

This may look like good news if you are borrowing.  And it is, sort of.

But ask yourself in the current inflationary environment where today gold had its best rally since January 25th would you loan money out for THIRTY YEARS at less than 4%?

Better yet, would you like to own this coupon in five years or ten years? Watch this video if you think otherwise.