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

To: Shane M who wrote (638)	12/6/1998 10:53:00 PM
From: cfimx	Read Replies (2) \| Respond to of 4691

>>Re BA. I don't think BA fits the mold of "Buffett" stock. The first thing I look at: In 1991 (as far as my database goes back) book value for BA was $12.14. The most recent figure I show is a book of $13.45. This company is not growing equity much for the shareholders, even during the recent years of the uptick in the business cycle. See table below. yr book 1991 $12.14 1992 $11.26 1993 $12.59 1994 $13.73 1995 $13.21 1996 $13.94 1997 $13.16 1998 $13.45<<< One of the problems with the Buffetology book is the emphasis on things Buffet probably wouldn't do such as focus on "book value." I don't think Buffet would look at a column of numbers (although he might for an insurance company.) and rule this out or this in. He's even said so in his company meetings. Buffet would likely say "the first thing to look at" is NOT A DATABASE with some numbers in it. But this: Is it a good business or not? Does the CEO communicate like an owner? What does the proxy tell you? You could miss a BUNCH of opportunities if you screened for growth in book value. Why? Because there are bullet proof franchises with NO BOOK VALUE. Or a company could be gushing cash and SHRINKING their book value year after year. Or there could be things that distort book value like goodwill, or writeoffs, or software development costs. Or the company could have been an LBO so there is no equity value but probably plenty of economic value. SEE's has less equity today than when Buffet bought it. It has distributed ALL of it's cash flow and then some so Buffet has eaten DEEP into the equity. One might SKIP See's if you liked to see the BV on the rise. Having said that, would you say that BA has no more economic value today than it did in 1991, as the numbers might suggest? I would say that it has much more economic value than it had 8 years ago. But the "database" wouldn't detect that.