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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: SliderOnTheBlack who wrote (92465)	7/18/2001 10:06:08 AM
From: Art Bechhoefer	Respond to of 95453

Slider, whew! what an interesting set of views you've provided. I really can't speak for Warren Buffett, except to note that (1) he is not in a position to invest in companies with asset value much less than a couple hundred million--just isn't worth the effort. We're talking here about much smaller companies. (2) Buffett looks for companies with good long term prospects, and, as you suggest, maybe the oil patch, or at least the smaller, more specialized companies, don't fit the bill. But where I believe Buffett does make sense, for whatever size company you're talking about, is in finding and supporting good management. That is really the secret of his investment success. When he bought the Omaha Furniture Mart, he continued to let Mrs. Bluhm run the shop, even after she reached the age of 100, because she was so good at it. His insurance companies are run by people who really enjoy that business and who run it because they love that kind of work. I firmly believe that if you have skilled managers in the oil business, they will figure out what makes sense, regardless of which part of the cycle we're in. That probably accounts for the success of XOM over the last 30 years or so. It's a company that has been able to attract and keep good managers. I recently invested in a small oil exploration company whose asset value greatly exceed the market price per share. I bought the stock when oil prices were low on the assumption that a mere increase in the prices of crude and natural gas would set the company straight. However, I didn't expect the management to bargain away all its future profits by hedging their oil and gas sales--largely to fatten their own pocketbooks. The stock eventually did well enough so that I was able to triple my investment, but I was not interested in holding this stock because it was clear that management would act more in its own personal interest than in that of the smaller shareholders. The stock went from about 2 to 9 over the past couple of years, but recently has dropped back to about 6, and no wonder. The management is taking all the profits in the form of stock that benefits only themselves. So the lesson, if there is one, is that you really have to let good management do its job, and if you suspect that the management isn't all that great, you need to look for another company. Art