Forum Archive Index - October 2000

["Krypt Or" <kryptz@hotmail.com>]

We now have:

SKC, RBD, AIA, BCH, WHS, TRH, WAM, POT, POA, LPC, MHI, MON, FRU.

In order to keep us focused and on track:

This list selection is focused on applying Buffettology to NZSE stocks.

Through discusssion of each share we will arrive at, by consensus a 
selection of four stocks; and why not take our time in discussing these? 
(say 1 Nov for final vote?)

I agree that it isn't useful to set up a Sharechat portfolio based on 
Buffetology because is about very long term investing but one on short term 
recovery stocks could be ok.

James - On SKC one could argue any company is prone to regulation. While I 
agree on the social costs I really doubt our goverment is really capable of 
thinking in these terms. Didn't Buffett invest in Philip Morris (I could be 
wrong)?


Now for the nitty gritty (we need to do this on all shares before we vote 
ok?):

On BCH analysis:

This is where I struggle and I'm hoping to resolve this!

SNOOPY said:

"Since P/E is one measure of anticipated growth shouldn't the P/E
figure that you use be related to the growth rate and the future
valuation discount rate (one measure of the quality of earnings)
of 15% that you are using?  This *is* a question BTW, not an
answer."

I agree PE should reflect quality of earnings but it should be less than or 
equal to earnings growth. How about 70% of earnings growth as a safety 
margin?

So that would value BCH at (from Brians analysis):

70% of 23 (average earnings growth of past 5 yrs) = 16.1
16.1 x 30c = $4.83.
(At PE of 23 price would equal $6.90).

BCH - nice company but WAY overvalued in my opinion.










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