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Strategies & Market Trends : Buffettology
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To: James Clarke who wrote (2165)2/18/2000 3:44:00 AM
From: Paul Senior  Read Replies (1) of 4691
 
Okay, I'll throw a change of pace ball by bringing in Duff and Phelps Credit Rating (DCR) as a Buffett stock. There would be three things not to like about DCR - the price is too high, the public history should be longer, management access and evaluation is not the same as Mr. Buffett can command and judge. Possibly a fourth issue also - the stock float/outstanding shares is small. (This isn't an issue for me.)

Here's what's to like about DCR: As a credit rating agency they are in an oligopoly. With reasonable barriers to entry. It's relatively easy to envision their business 10 or 15 years out. They provide an essential service that is not likely to go away or change much. (It'll change but not so much -I presume- as to scare away Mr. Buffett if he were interested.) DCR increases sales and earnings every year (so far). They could/should/might/may be able to continue doing this. They have tremendous ROE numbers. They've paid down long term debt (now zero). They've bought back stock. (Insiders own a lot of stock too.)

I don't like the high pe or high p/sales. This stock has been discovered! Still, if the price drops a bit more, I will add to my small position. Five years from today DCR and its stock should do quite well.

jmo, and I've been wrong many, many times before.
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