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Strategies & Market Trends : Value Investing
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Jurgis Bekepuris
To: IndependentValue who wrote (53773)4/23/2014 12:45:10 AM
From: Spekulatius2 Recommendations  Read Replies (2) of 78751
 
WTW - we agree on the facts, but disagree on the conclusions. I also disagree on your financial scenarios. i noticed for example that you assumed stable gross and EBIT margins with shrinking revenues in your worst case scenario. So that assumes no negative operating leverage. Munger said "Always invert!". What would you say if I assumed a best case scenario with increasing revenues and no increase in margins?

FWIW, stable margins with rapidly shrinking revenues almost never happen. Negative operating leverage is a powerful headwind and with the meeting business, there is a lot of fixed costs. So I think that is a big flaw in your assumptions right there, because I think things can go downhill much faster than your scenario implies. This I think is a key point, because I think the margin of safety in buying WTW is just not there.
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