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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (3302)	2/24/1998 1:22:00 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78490

Michael, >>I'm on the wrong side, theoretically, of a stock gaining >>positive momentum that everyone wants to like. Are you saying that you are afraid to be wrong? I think that you made compelling arguments, but unfortunately now you are taking a stance of perma-bears that say "I am right but market simply does not understand me". I respect you when you say: "I don't like this stock, this company, it's too expensive, so I won't buy". I have a problem when people claim to know some higher truth that makes their position "right". Well, let's dissect some of your arguments: > What barriers to entry? Let's take any brand and you can ask the same question. Do you remember the time when branded goods were dead? Everybody was going to buy generic soda, razor, toothpaste, etc. KO, G, PG, JNJ were going to disappear from the face of the planet. I totally agree with you that I would not buy overpriced branded goods. But - count me as a minority. Most of the people pick the first shiny, familiar brand they see. And some people are "addicted" to Coke, Nike sneakers or Gillette razors. And sometimes brands win by quality too. Barriers of entry. There are no conventional barriers of entry for almost any consumer franchise. Do you remember when G was almost obliterated by BiC? I think Hagstrom mentions that. These type of challenges make or brake great companies. G survived and flourished, RBD has not recovered, OAT is fumbling along. > What's to prevent another brand to get hot? Personally, I can't figure out why people drink Coke, when there are so many better alternatives available. Again, some companies do it right. Some companies don't. Will Nike become a roadkill or will it flourish? It's a call for 1-900 psychics. :-))) Somebody else called NKE "a mediocre product hyped to heaven" and compared it to MCD. I can only hope that the comparison is correct. I've been in the developing countries and believe it or not, MCD is a symbol of the great western way of life. True, some people hate it, I hate it, but we are minority. And MCD is a worthwhile investment now - I don't follow it for personal reasons. > What's to prevent another brand to get hot or the > shoe mania (which is a recent phenomenon) to end. I was not aware that wearing shoes is a "recent phenomenon". :-))) Facetiousness aside, I don't understand what you mean by "shoe mania". People need shoes to wear. If they jog or play basket-ball, they wear out the shoes faster. That's the only thing I see. Am I missing something? >Nike's then stuck with overbuilt infrastructure How much overbuilt is it? I believe they outsource the production. So they have no factories. Warehouses and distribution system is great to have in any case, because even if they switch to producing airplanes :-) they will be able to use it. > and a longer-term inventory problem. How long is "longer-term"? >And it will become a PE 50 stock that makes no sense > just like Gilette or Microsoft or Coke. But Buffett is not selling Gilette or Coke. :-)))) No, I agree with you that Gilette and Coke are expensive, and that I wouldn't buy them now. I would not make any calls as to whether there is no sense to that pricing. Stewart asked me why I thought 1.5 PSR "cheap". That's just my yardstick, and I don't have some scientific reason for using it. However, it is cheap compared not only to G and KO, but to number of other top franchises I follow. Once again, if it's a fad company - it does not deserve more than 1.5 PSR. If it's an emerging "blue chip", then it could trade alongside other franchises at 2-3 PSR. Or, if the market tanks, it could trade alongside other franchises at 1 PSR. I like the odds. :-))) > But that's like Oracle blaming Asia. There's > more to it than just a one-time event IMO. Actually ORCL is a good example. It's a great company and I don't believe that MSFT is eating their lunch. I would buy the stock but it's too expensive by my yardstick. I would like to see the world without "one-time" charges and with candid management reports. Unfortunately that is not the case. Anyway, it's nice to have a reasonable discussion. Good luck Jurgis