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

To: Shane M who wrote (477)	10/22/1998 8:23:00 AM
From: Crocodile	Read Replies (2) \| Respond to of 4690

Shane, I haven't looked at RAL in any great detail so I wouldn't offer an opinion on what constitutes a good entry point and what the long term outlook is. However, as mentioned previously, RAL seems like a good choice on the basis of type of business and their position within their industry. I think the "pet industry" is still showing strength and I believe that RAL is well positioned in it despite any competition. Also, as someone with an agricultural background, I am quite aware of the magnitude of the pet food industry as an end user of grain. It's hard to say if changes in the economy could have a big effect on that industry. As for whether there is a "reason" for RAL's current trading levels, I can't say. If I were seriously looking at RAL, I would probably try to look at long term financials to see if past fluctuations in profitability were tied to grain/energy prices in any way. I would try to keep in mind the fact that grain/energy would, in all likelihood, be purchased under contracts so the effect of a sharp upward or downward move would not be noticed for awhile. However, eventually serious price declines or increases would begin to either benefit or chip away at profitability. In the pet food industry, I think that fluctuating production costs may have to be absorbed at either the manufacturing or wholesale levels. To remain competitive I believe that a product has to be sold for its customary $17.99 a bag regardless of the COP so I think this makes it an important factor. Unlike a fastfood place that can shrink its hamburgers to increase profits, a 20 pound bag of dog food remains a 20 pound bag. Practical details. BTW, regarding your comment about "bargains", I have to agree with your reasons for being cautious. It underscores the whole philosophy of gradually building a position in a long term hold. Better a little mistake than a big one. Please keep in mind that the above comments are just some practical thoughts concerning RAL. I don't think of myself as a number-cruncher. I'm more interested in the story behind a company and how it fits into the picture. That's also the area of Buffett's investment philosophy which interests me the most. Croc