By now you are certainly aware of the loss that 74-time Jeopardy! champion Ken Jennings suffered when the game show aired Tuesday night. The Final Jeopardy! answer that did the baby-faced trivia assassin in asked the contestants to name the company that fit this description: "Most of this firm's 70,000 seasonal white-collar employees work only four months a year."
Jennings -- who, by the way, had gotten more than 91% of all of the questions he had answered over 75 shows correct -- struggled, and finally wrote down FedEx
It occurred to many people just how amazing a marketing windfall this was for H&R Block, including the folks at H&R Block. Block immediately offered Jennings free tax preparation services for life.
Here's the other thing about H&R Block, though. It's not so much that the question created so much interest in the company; what interests me is that H&R Block is so dominant in the tax preparation business that it could have been an obvious answer to a Final Jeopardy! question in the first place. There are other tax prep companies, including Jackson Hewitt
Tax preparation isn't likely to be a business that investors would get that excited about -- but the performance and potential at Block suggests that they should. This is an extremely sustainable, profitable business. Warren Buffett snapped up 8% of the company for Berkshire Hathaway
This is a company with simply amazing economics. I learned recently on the Fool discussion boards that the H&R Block franchise was essentially started by accident. The Block brothers provided all sorts of services to businesses in the Kansas City area in the 1950s, including tax preparation. They were determined to get out of the tax prep business, as it was taking too much time from their other endeavors. One customer suggested that they try to make a business just out of tax prep before they abandoned it entirely, so they ran an ad, and suddenly found themselves overwhelmed with customers. Soon after, they jettisoned every other business and focused on tax prep. The company has recently branched out into mortgage origination and retail stock brokerage. The latter component, in my view, is out of step with the remainder of the business.
Winner Nancy Zerg offers her own brilliant marketing angle. What a boon she would have been for Disney
Jennings' run was good for Disney as well -- Jeopardy!'s ratings were 22% higher this year than last year due to the extreme interest in his streak.
Bill Mann owns shares of Walt Disney Company and Berkshire Hathaway. His own Jeopardy! career ended at tryouts when he biffed on the question "What state capital has the most syllables in its name?"