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Li Lu

Timberland
NYSE:TBL
1998-2000
Industry: Shoes
Category: Wonderful Brand/Legal

Why the Company is Mispriced
Company made a misstep, built it's brand on waterproof claim
Released products that were not waterproof, confused the market

Management gave guidance, missed, shareholders got mad
Insiders decided to stop giving guidance
0 analyst coverage

Insiders had 40% ownership but 98% voting
Market figures management is just milking the company for money, manipulating the book
Several lawsuits regarding this issue

Finally, Asian crisis hit, which impacted shoe companies, Timberland stock fell as a part of the group, insulated from crisis since not much business in Asian however

Alternative View
Stock is trading 5x PE, for a small premium to book value, 50% ROIC, improving margins

Li Lu went out of his way to get to know management, went to their church, talked to their neighbors, got on the same board as founder's son
Discovered that the ownership family had the highest integrity
Read all the lawsuits, understood that they were weak arguments

Result
Bought at $28/sh (340m market cap)
Bought at 5x earnings, earnings grew, multiple expanded to 15x
Stock went up 7x in 2 years, which is a 265% CAGR
Originally when Li Lu went to the analyst's meeting there were 3 people. 2 years later there were 50.

Notably
The revenue was relatively flat for 5 years, and then it just shot up for 30% growth
I don't quite understand how this happened
Perhaps it had to do something with the strength of the brand in pop culture, this wasn't really heavily discussed
But the way I see it, you could see this great brand (some hindsight here), with strong management, at a fairly cheap price