Questions and comments from readers:

I hope a whole lotta investors see your article. The comparison might do some good for my languishing shares of MTG. You've just about convinced me that it might be a good idea to buy more shares. My only criticism, if it is a criticism, is that I still don't really understand why MTG is so much out of favor. As for Gillette, I bought the Mach 3 razor because of a write-up in Bloomberg's that pointed out that none of its testers had received a nick. The razor is far better than I expected, a major breakthrough in shaving even! To my chagrin, my hair has been relocating from my forehead to my ears and nose. The ear lobes themselves are growing hair. The lobes are a problem. Scissors don't work, but shaving them results in a whole lotta nicks and bleeding However, the Mach 3 can shave the ears without nicking. It's quite a combination -- a razor that shaves closer than a conventional razor but also a razor that offers superb protection from nicks. I love it. As for the expensive blades, I find that I only need to change them monthly. So, my expense comes to a little over a dollar a month for blades -- well worth it. And my point: Good will. Gillette has a lot of that asset. It provides the pizazz that apparently translates into a high stock price.

Tom Rickenbacker

A possible explanation

I enjoyed your article on Gillette and MGIC. I subscribe to the "Warren Buffett" theory of value investing and have been analyzing the PMI industry and several companies in it for the past several months. I recently purchased shares in MGIC for a partnership I manage. I consider the company a "toll booth" investment with excellent management and a sustainable competitive advantage. The whole industry is valued low, but, as you know, academic studies of the "low P/E" effect indicate that on average stocks with low P/Es (TTM) outperform the market over the long term.

Could the difference in the market's valuation of the two companies be due to Warren Buffett already owns Gillette combined with all the books about his investments that have come out in the last few years?

Glen D. West, MBA

Dear Glen:

Thanks for your comments. I am sure the fact that Buffett owns a lot og Gillette is a factor, but not enough to account for its astronomical p/e.

John

Great article

Great article Dr. Price. I am looking forward to your article on the present value of future cash flows and how to clculate them. A few comments on MGIC. I have looked into MGIC and was impressed with managments ability to steadily increase earnings. However it has been so long since a housing slowdown that I can't comfortably see the future impact it would have on MGIC's business. Still more work to do.

In Health,
    Brett Davidson