I can posit lots of things like that. In certain measure, Mr. Market already has. Which is why the companies are looking attractive.
The way I see it, there are a handful of big, drug houses with full-scale sales forces, academic affiliations, lobbiests, etc. When a biotech start-up gets something interesting, they partner with one of these big guys to market it. So I look at the big Pharmas as marketers more than innovators.
These three are beaten up. I don't know which one is going to turn, most or soonest. Hence, the drug basket approach.
Is there a ceiling? I don't really know. I do know that as people get more assets, the harder they cling to the planet. In all countries. I see more people. I see more people getting older. I see more older people willing to spend more on drugs.
It's not a slam dunk, but what do you expect when you're competing against a worldwide coterie of very smart analysts with gajillions of investment dollars at their disposal? I generally prefer tiny, tiny situations where the big guys can't get in, and the playing field is more level. Sometimes I know more than even the analysts in these situations. Problem is often one of liquidity. You have to be willing to sit on something for a long time without being able to sell. Another problem is that once you find something like that, it's often too small to post on a board like this. I can tell you it works because over the past 6 months I've enjoyed a bunch of buyouts eg, LIQB, MDII, KRSC, HIPC. I've also endured a cram-down like PRES.
The admirable thing about Buffett is that over the years he has told us exactly the tests an investor must apply to average 15-20%/year returns. It's all right there in his letters. Sure, it requires a lot of work. And sure, great investments come rarely. ----Keep taking pitches because you only have 20 swings.
BTW, you are absolutely right that AXP, GMT, and GLK are tough to analyze de novo. I cheated here by assuming that Buffett+Simpson have done their homework. I looked to see if the underlying business had materially changed for the worse, and determined a price that feels good to me.
I ask you how hard is it to buy HMSV which was an 83% subsidiary of MEC (ie, reported on MidAmerican's income statement, and mentioned in Buffett's 2002 shareholder letter), at the time the Fed was dropping interest rates and homeowners were busy swapping houses (according to the local newspapers in the HMSV service areas), and Mr. Market was pricing the stock as a dot.bomb because company name was Home Services.com, even though it actually is a real estate brokerage roll-up, giving them the #1 or #2 realtor in each of their market areas? (And how annoying is it to have been bought out at a price lower than that recommended by the outside directors?) |
