Robert, I like your BA analysis. If you really believe (I do) that you've got 10% long term unit growth. And if you believe (I do) that there are two companies that can make airplanes, and there isn't going to be another one for a long time, then Boeing may be even better than a Buffett stock, SIMPLY BECAUSE THE DEMAND IS CYCLICAL. Cyclicality gives a smart investor buying opportunities. And selling opportunities for that matter. It is unlikely you are going to get a shot to buy at a reasonable price a stock that grows at 10% every quarter, every year. But put some cyclicality into that, and you get a fear and greed cycle in the stock which you can take advantage of if you really believe the growth premise. Nike is in the same category I believe - Mr. Market has given investors spectacular investment opportunities in that one when the cycle was down. Intel has been another one, though I fear their franchise may be breaking down. The key is being able to forecast mid-cycle earnings power and value them off that. This is extremely difficult. With enough work, is it possible? I don't know yet - ask me in ten years when I can evaluate my Nike pick and my Boeing pick.
I am making a careful distinction between three types of businesses.
1) Very predictable growers (KO, G, MSFT?, AIG)
2) Cyclical growers (INTC, BA, DOV, CAT?, DE?)
3) Cyclical losers (steels, autos) - for these you can't be confident that the next peak will be significantly higher than the previous one.
As an investor, applying Buffett's lessons to the 2's might be appropriate in a market like this where anything with unpredicable earnings QUARTER TO QUARTER gets murdered periodically. I think this concept may be worth a lot of pondering.
Jim |
