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Strategies & Market Trends : Buffettology
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To: James Clarke who wrote (239)8/9/1998 10:41:00 PM
From: Jurgis Bekepuris  Read Replies (1) of 4691
 
James and Mike,

Thanks for your comments. Definitely,
the Buffett-wannabes should be excellent qualitators :-)
before turning to the spreadsheet. That's why I ran the
spreadsheet on companies that I know and at least
partially understand. You are right that very few
companies qualify to be called "Buffett companies".
I looked at FAST's annual and I have doubts
about both their growth rate and about their
cash flows - it looks like capital expenditures are
using all operating cash flow.

I've also put SUP and COHU on hold. Both are
cyclical - SUP is in automotive industry, COHU in
semi-equips. Both may be thought cheap on absolute
valuation, but that's different from Buffettology. ;-)

Do you guys
think that the spreadsheet helps to determine
what price to pay for a stock?

Case in point: PEP. I bought some last year before
YUM spin-off. I'm basically flat on the stock.
It's definitely Buffett's stock though worse than KO.
The spreadsheet predicts meager returns from here.
I assume that ROE could expand if PEP dumps the bottling
operations, but checking the numbers before buying would have
been wiser. ;-) :-(

>>You are assuming the company can reinvest all its
>> retained earnings at the
>>same ROE [not P/E - sorry] for the next ten years.

Let's assume that a company can't grow using
all its retained earnings, but that it still gets the
current margin on current sales for the next 10 years.
Would share buybacks using all retained earnings,
accomplish the goal of maintaining current ROE in
no growth environment?

Good luck

Jurgis
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