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Strategies & Market Trends : Buffettology
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To: Ryan Hess who wrote (2629)8/3/2000 1:09:49 AM
From: James Clarke  Read Replies (1) of 4690
 
A couple Buffetty stocks that are working very nicely and a couple that seem spring loaded to go soon.

GMT is working nicely as the company restructures gradually into higher return on capital businesses. Not that they were that bad to begin with. Thanks Mike. Mike and I bought this immediately at 30 and change in March on the press release that Buffett had bought. Actually that was me - Mike was buying with Buffett, though we got the same price. I added to this at 37, and I rarely average up.

Ambac (ABK) is testing a high it has topped at for the last two years. But over those two years the earnings have gone up over 30%. The longer I own this business the more I like its predictability. This is another company increasing return on capital. I have traded the range in this stock with part of my position, buying in the 40s and selling in the high 50s with half my position. This time I was tempted to sell at 60 but let it go. I'm thinking 75-80 very soon.

Dun & Bradstreet (DNB) - the catalyst is so close and the stock hasn't moved yet. Buffett paid what, 28 for this. I think this one is spring-loaded for a 30% move.

Ralston Purina (RAL) is also working. I have gotten pretty much what I expected out of RAL when I bought it at 18-19 - I just thought I was close to the bottom and long-term this business would make me a good return as a buy and hold. I wasn't looking for any dramatic move in the stock - just for a very high quality holding at the right price. I wouldn't pay much above 20 for the stock, though I don't think I'd sell it below 27 now. This is a company I want to hold for a long time and I'd expect that valuation to grow. The home-run case here is that this company is a sitting duck takeover target.

Abercrombie & Fitch (ANF) has worked great so far. Tomorrow the stock is going to move - I don't know which direction though. My last buy was at 15 1/4 averaging up - I would not think about selling below 25 unless I sense I missed something big. My valuation is 30 and I sense this is the kind of stock that overshoots intrinsic value both on the upside and the downside. This is not just a financials story - since I bought it I have done a lot of kick the tires research and like what I see.

And how about Berkshire itself? Look at the price moves in ACL or XL. The insurance business is recovering.
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