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

To: Michael Burry who wrote (4180)	5/28/1998 11:58:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 78534

Clayton is a Buffett pick, not a Graham pick. The company is in the manufactured housing business, a unique industry which takes some time to understand. Hint - think beyond "trailers". And Clayton is the gem of the industry. Over a decade of return on equity in the 17-20% range, through a cycle. What is that worth? Considerably above book value, and considerably above a "value" P/E ratio. The business trades at about 16 times earnings, below its usual level, especially relative to the market. Using the model from Buffetology, which Mike knows well, the stock is worth 25-28 in my estimation, and trades at 18 and change. The stock has been trading in a range for almost three years, though the growth rate has continued to be 16%. If the growth keeps up, these growth stocks which pause for a while tend to be huge winners. What you want to spend your time researching is whether that growth rate can continue. I think it can. There is nothing wrong with buying growth, as long as you're not paying for it. This is not a net-net, but that's not the only game I play. I have owned this for a year and a half and it has been good to me (my basis is about 13). Common sense, frugal management with a long term track record. And Wall Street doesn't get it - they think "manufactured housing? who would buy that when they can buy a Toll Brothers home? I wouldn't buy that" Of course they wouldn't. And that's why I have been able to steal companies like Clayton, Greyhound and Red Roof Inns. Don't shop where Wall Street shops. This is a buying opportunity, but I'm not looking for a short term gain here. This is one I will never pay taxes on as long as they keep being Clayton. Jim