Forum Archive Index - October 2000

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

not bad, altho you missed the good management one and being in an
industry which the layman can understand. 
Most of the books on Buffett are rubbish full of what the authors think
are Buffet's best one liners and reflecting the author's desire to make a
buck
and lack of financial understanding. Who's the guy who writes grovelling
books about the royals etc before the body is yet cold? That sort of
thing.
The best one I've read is Buffetology by Mary Buffett even tho she does
dumb things down a bit and string them out.

cheers,
Hugh

----------
> From: Philip Robinson <robph639@student.otago.ac.nz>
> To: sharechat@sharechat.co.nz
> Subject: [sharechat] Buffet Analysis
> Date: Friday, 6 October 2000 23:55
> 
> After reading a number of books on Buffet these are the rules I have put
> together. And as most of you will know you can pretty much give up on the
> NZSE as far as these are concerned.
> I have also run into problems with forecasting per share equity values on
> current and forecast growth rates from the Buffetology book. Anyway that
is
> the specifics these are the basics that he advocates. Phil.
> 
> Buffet Analysis
> 
> Nine questions to help one determine if a business is truly an Excellent
one
> 
> 1. Does the business have an identifiable consumer monopoly?
> It will be either a brand-name product or a key service that people or
> businesses are dependent on. A great product is where you start, but a
great
> product doesn't necessarily mean a great company
> 
> 2. Are the earnings of the company strong and showing an upward trend
> Five or more years of earnings information is required. One looks for an
> annual per share earnings that are strong and show an upward trend.
> 
> 3. Is the company conservatively financed
> Star companies usually carry long-term debt of less than one times
current
> net earnings. Sometimes an excellent company with a consumer monopoly
will
> add a large amount of debt to finance buying another business, one has to
> judge whether the acquisition is also a consumer monopoly or not.
> 
> 4. Does the business CONSISTENTLY earn a high rate of return on
shareholders
> ' equity?
> A return on SH equity of 15% at least and preferably more. High rates of
> return on equity are indicative of an excellent business.
> 
> 5. Does the business get to retain its earnings?
> One wants to invest in businesses that can retain their earnings and
haven't
> committed themselves to paying out a high percentage of their profits as
> dividends. This way the shareholders can benefit from the full effects of
> compounding, which is the secret to getting really rich.
> 
> 6. How much does the business have to spend on maintaining current
> operations?
> Making is money is one thing, retaining it is another, and not having to
> spend it on maintaining current operations is still another. The capital
> requirements of a business may be so demanding that a company ends up
having
> little or no money left to increase the fortunes of its shareholders.
> 
> 7. Is the company free to reinvest retained earnings in new business
> opportunities, expansion of operations, or share repurchase? How good a
job
> does the management do at this?
> Share repurchases increase per share earnings and expansion of operations
> will hopefully utilise the retained earnings to give an above average
rate
> of return.
> 
> 8. Is the company free to adjust prices to inflation?
> 
> 9. Will the value added by retained earnings increase the market value of
> the company?
> 
> 10.  The company should not be in the commodity business!
> 
> 
> 
>
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