Forum Archive Index - October 2000

["hugh webber" <hugh.webber@clear.net.nz>]

I wouldn't say Buffett would rule out AIA on price; part of his analysis is

analysing the past and future rate of growth and he's known for having
bought some shares 'at too high a price' only to prove the critics totally
wrong as the growth rate continues and the p/e increases.
He also stays out of commodities i.e. products which have a lot of
competition (Telecom in the future?) and in which rival producers compete
on price. Interesting article on Buffett and technology in the Press today
in which a number of tech industry people ended up saying he knew more 
about techs than they did.
I guess one also needs to consider the bottom of the range as Telecom
continues its drive to become an income stock again after halving its
dividend
and I'd put it at 
about $3.60 to attract back in again the sort of people like myself who 
held it for a while as an income stock.
Yes, I'd go with Sky City as a Buffett share as long as other casinos stay
out of Auckland and Sky avoids the hotel industry.
I'd have reservations about Shotover Jet and some of the retailers on the
list.
Tourism is a boom and bust industry and always promises a lot more than it
delivers, and it delivers much later than anticipated. Should we mention
aquaria,
hotels, Mt Cavendish gondola (a very well done project that has deserved
much better)
and so on. 

cheers
Hugh
----------
> From: Talacek, Philip  <pjt57@elec.canterbury.ac.nz>
> To: sharechat@sharechat.co.nz
> Subject: RE: [sharechat] Re - Wringing Telecom & Buffet & NZ Shares
> Date: Thursday, 5 October 2000 23:55
> 
> 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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