Feb 252006

H&R Block’s stock crashed the other day to about 23 bucks. Trading at a P/E of 12ish.

The industry and market is trading at 28 and 18. HRB is the industry leader in tax advice and filing. It has brand name recognition and I think that might be its competitve advantage. But I don’t think that is such a big issue seeing as how I believe the stock price should bounce back soon. Next quarter at the latest (unless their earnings are lower than their already lowered expectations). The stats of the company are good (except for growth, it has been lessening each year and margins are decreasing).

Why has god shown this opportunity to me?
I think everyone is focussing on their recent tax mistatement fiasco (not that big, they only managed to overstate their earnings by about 2-3%). And their recent customer service problems. And their other problems. Alright, so the problems they are having seem to be symptoms of a larger– and potentially fatal–problem.

The question here is whether the management can actually turn the company around and I will need to look up the literature on that.

By the numbers though, this is still a great buy. Good dividend, strong earnings, no ridiculous stock options (but unfortunately not a high managerial stock ownership rate).

HOLY SHIT! I just found this out. Berkshire Hathaway (Warren Buffet’s company) owns about 5% of the company. Unfortunately, it appears they may have reduced their share in the company during the last half of the past year. However, they still own a substanial amount of the company. BRK has a history of pressing managements to reveal underlying value in a company. The B man usually buys companies he sees growing in the future. Now, I just need to find some cash, cause this pretty much seals the deal for me.

Also, Oakmark owns about 5% of it, too. Also Harris whatever also owns 5%. Harris whatever is the owner of Oakmark. So they own like 10%. They’re value investors.

Or just buy Home Depot and Anheuser Busch like Buffet did.

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