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

To: James Clarke who wrote (237)	8/9/1998 7:27:00 PM
From: Michael Burry	Respond to of 4691

No doubt. The biggest problem would-be Buffettologists have is applying the quantitative to stocks that don't qualify qualitatively. Most tech companies with less than a ten year history just don't make it. Booming early 90's don't make up for the lack of a significant 10-15 year earnings and reinvestment history. Buffett got this at least from Graham - you need the history to predict the future. Mike

To: James Clarke who wrote (237)	8/9/1998 10:12:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 4691

Just noticed in rereading - I made an important error in my last paragraph. It should have read: You are assuming the company can reinvest all its retained earnings at the same ROE [not P/E - sorry] for the next ten years.

To: James Clarke who wrote (237)	8/10/1998 2:02:00 PM
From: Axel Gunderson	Respond to of 4691

James: I agree with you 100% that the qualitative must come before the quantitative when looking at Buffett's success. That said, while I think the Buffettology book does a better job of identifying the broad classes of business that fit, and thus is perhaps most useful for those beginning to follow Buffett, the Hagstrom book does a better job in laying out the qualitative criteria used to evaluate an individual company. In its way it is analogous to the Fisher book in this respect. I'd like to offer a company for everybody to consider that is NOT a Buffett-type stock as laid out in Buffettology. However it is most definitely a Fisher-type company, and I think that those who have read Hagstrom's book will see that it fits the criteria there, particularly in regards to rational management. The company is Dionex (DNEX), a maker of chemical analysis equipment, chromatography. I am very familiar with this company from a number of perspectives and have been for some time, so I may be unduly biased. Up to you guys to straighten me out. But in terms of management rationality, they seem to me about all one could ask for in a company. Dionex produces a quality product (have used in my work) and provides very good service and support for same. The product keeps getting better, and they are the dominant player in their market (which they keep finding ways to expand). DNEX has had 18 consecutive years of increasing earnings, generates plenty of free cash flow, carries no debt, and - here is where management impresses me with their rationality - share repurchasing and retirement has proceeded at a significant pace for several years, yet they are careful to buy when their stock is cheap, and buy less when it is dear. Largely because of this repurchasing, their ROE is now over 30% and growing. Here's the kicker. In covering Buffett's criteria for the numbers, Hagstrom gives an example where the yield on owner's earnings beats the current long bond. This is supposedly Buffett's quick test, and at current prices DNEX passes. Axel