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

To: cfimx who wrote (639)	12/6/1998 11:58:00 PM
From: Shane M	Read Replies (2) \| Respond to of 4691

twister, Sorry that the "DATABASE" method offends <g>. Your point is well taken that book value growth is not the be all/end all of a Buffett stock. This said, if BA is a growth story, which it should be, I would've expected more growth out of book value. This is a developing industry,and BA can't just syphon off all the cashflow to shareholders like a candy company or newspaper. They must continually invest in the business or risk becoming yesterdays outdated airline equipment. It looks to me like almost every bit of money they're making has to be reinvested in the business just to tread water. Maybe I should have prefaced my comments mentioning I would expect airline manufacturing to be a good business - with those comments based in Jim Clarke's first post outlining the long term growth story and duopoly market conditions. This is a market structure that should allow for supra-normal profits. However, I feel that Boeing management has failed miserably in delivering value to the shareholders. To defend this outlook I do look to a database for the numbers. I won't post several columns of numbers, but ROE/EPS/Book value growth don't reflect any degree of execution on BA's part. I find it difficult to value a stock that has had this shaky of a history, and I'd certainly want to see some proof that things are turning around. That's me. I don't pretend to speak for Buffett. Just trying to learn here. <g> If there's one theme I think that runs through the _Buffettology_ book, it's that after being in a good business, predictability is the #1 factor to look for in a Buffett stock. I honestly don't see any predictability here at all w/ the exception of a relatively consistent pattern of dissapointment. That said, going forward I'd be interested in BA should something come along to "kick the dog". This company should be able to do better than it has shown. I just would like to see some progress before committing funds. Shane

To: cfimx who wrote (639)	12/7/1998 7:43:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 4691

A very insightful post, though I would disagree with the main point - I think the great one DOES like to see steadily rising book value. But your point is more than that - I don't think that is what you were saying. Clearly Warren Buffett is smart enough to be able to see through accounting numbers in the way your post illustrated. I like to think I am too. The idea of Buffett using computer screens is absolutely laughable. Which is the big flaw in the Buffetology book - if you don't know what you are doing, you are going to make big mistakes no matter whose formula you are using, because if the person is bright enough to make $30 billion, it is highly unlikely that they use a formula that rigidly. What is missing at Boeing is management that Warren Buffett would trust. From all I can see, these guys range from inept to borderline dishonest. The reason I bought the stock is that I think there is a lot of pressure from shareholders to fire them. The Board meets on December 14th. I think there is a good shot that Condit, the CEO, gets fired. But that's not enough, because the guy who would take his place may be just as bad. I think the stock would pop a couple points on that news. But the homerun would be if they fire the whole group and bring in a crew from GE. I am very comfortable with a feeler position in this stock. I still think there is a good chance I get the shot to fill the position at 27-28, so if you're looking to buy the stock I don't think you're missing the boat if it runs a little bit now. A price in the 20s may come on a market break, or it may come because the bad news is not all out yet. I have NOT put all my chips on the table. And as for whether Boeing is a Buffett stock, I think I come down to this. "Close enough." Jim