Forum Archive Index - October 2000

["Talacek, Philip " <pjt57@elec.canterbury.ac.nz>]

If one wanted to nit pick I suppose one could say there are no Buffet stocks
in NZ as he never invests out of the US.  But ignoring that I'm not sure
that AIA would make it in that it fails on the important criteria of price
at the moment.  At the right price it certainly does fit the criteria.
Looking for Buffet stocks I would think need the following criteria (I'm no
super expert on the man I'll probably miss things here, so I would like to
apologise in advance to any die hard fans)
- Pricing Power (ie inflation proof)
- Little Competition/ Large Barriers To Entry (could I start a rival
business any expect to make any reasonable sort of return on investment)
- Few Capital Demands (I do not want to have to keep spending to provide the
same service)
-Technology Proof (Future technological development will not blow the
business model to bits)
Which when all put together one gets companies which will consistently
provide massive free cash flows, despite what may be happening in the rest
of the world.  I think there are stocks in NZ which meet the above criteria
though if they are robust enough to meet Warren's requirements we can only
speculate.  Two that come off the top of my head are 
-RBD
-SJL
Now I know that there is a group here who hate RBD, but
-KFC will always be the only chicken place, and they have reasonable pricing
power.  
-Pizza Hutt is much strengthened with Eagle Boys.  With only two players now
the price of pizza has risen considerably in the last six months (read
increasing pricing power dam them).  
- One only need look at the price list of a Starbucks to see the pricing
power they have, yet I've never seen our local one empty.  
Strictly speaking the barriers to entry for any of these aren't high, but
the same as Buffet's See's Candy, McDonalds, Coke, Gillette etc their strong
brand strength means I wouldn't dream of trying to compete against any of
them (I'm not trying to say Pizza Hutt has the same brand strength as Coke).
Also the capital demands in the fast food business are low.  I'm no expert
but I'm sure once you buy your deep fryer the fact some new guy down the
road has the "Fat'O'Matic 2000" doesn't mean you have to get one to compete.
One could say the face competition from other types of fast food, but don't
think this is huge.  I know plenty of people who like KFC but wont touch MDs
or Fish and Chips.  Most importantly RBD is being given any at the moment

SJL is slightly different, and I'll be the first to say that it's management
has no proven ability to run it successfully.  But I feel it must have
potential as it is a virtual monopoly, in one of NZ's few growth industries.
Given the large amount owned by local Maori (I will not try to spell the
tribes name) I'm guessing the chances of any rivals getting consent to
compete on their rivers are well nil.  As a monopoly what they charge need
bare no resemblance to costs (should that suit).  If they can just manage
the thing properly (read don't kill anyone else) I see no reason why it
shouldn't make a killing (no pun intended).  They are spending $2m to
upgrade their boats at present but they spend can capital on their terms not
some one else's (no competition).  Clearly looking at SJL's history it
doesn't look Buffet like but neither did American Express, when he first
bought in.  Oh yeah SJL looks cheap compared to it's past and potential
earnings.

Sorry for this long winded post.  

Philip Talacek

Hold RBD, Don't hold SJL

PS Isn't odd how a post about TEL can morph into a discussion on Warren
Buffet and Jet Boating?


> -----Original Message-----
> From: Krypt Or [SMTP:kryptz@hotmail.com]
> Sent: Wednesday, 4 October 2000 21:52
> To:   sharechat@sharechat.co.nz
> Subject:      [sharechat] Re - Wringing Telecom & Buffett
> 
> Buffett stocks are few and far between....
> 
> Just how useful is this approach in NZ?
> 
> AIA? who else?
> 
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