Friday, February 23, 2007

Hit #145 (Smart & Final)

The smaller warehouse store, Smart & Final (SMF), is being taken private by Apollo Investments in a $815 million transaction. The cash offer, of $22/share represents a gain of 70.9% over my average cost of $12.87.

Unlike the big gorilla in this business, Costco, which is membership based, non-membership Smart & Final is mostly unknown. I was attracted to the stock due to the financials, low debt in particular, that made it look like a great target. In addition, an unusually honest endorsement hidden deep within a celebrity interview a long time ago piqued my interest.

Costco (COST) itself remains a great pick for long-term investors. Costco is a true anti-Home Depot. The executives and the board members have not sold their souls to the green stuff! There have been rumors that Costco's pristine balance sheet may make it a juicy target for private equity groups. I sincerely hope not. The precious few gems like Costco should be left alone as public entities so that others can look up to them. We all need role models; these days that is especially true for American executives.

Previous hit - Corillian (#144)


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