To: W.B. Michaels who wrote (34842 ) 3/18/1998 7:15:00 PM From: Mohan Marette Read Replies (1) | Respond to
of Berkshire Hathaway,Dell,capital efficiency and Smart Money Manager.analysts , (money managers,investment advisors and the like) but you sir seem to be an exception and a credit to your profession.<gg> Great job, you seem to be doing for yourself and your clients. Good show!!!!Fool on the Hill column, I just extracted the portion where they compare Berkshire Hathaway's GEICO and DELL as shining examples of 'efficient' companies etc etc.... Dell (Nasdaq:DELL - news) , for instance, does so well financially and carries what looks like a large capitalized value for a PC company precisely because its cost of operating capital is very small, given that its suppliers and employees regularly finance the current assets that the company does use. The similarities between Dell and GEICO, for one, are significant. Both operate in seemingly low-margin businesses. Both cut out the middleman and market directly to their customers. Both, therefore, gain a cost advantage over competitors. More important, both employ far less capital than their competitors to achieve the same results, meaning that additional inflows of capital into these businesses generates much higher earnings growth than their competitors. Capital efficiency, and not margins, is the essence of the "light" business model with a high stock market valuation. ......
