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

To: James Clarke who wrote (672)	12/11/1998 1:43:00 AM
From: Shane M	Read Replies (1) \| Respond to of 4691

Thread, I placed an order for Central Parking (CPC). I'm hoping it has found it's new price floor for now. We'll see. I bought a small position leaving room to average into a full position if I desire. As I've mentioned, I think this stock fits the Buffettology criterion. The business is parking lots. They're busy buying up alot of the competition which should provide them some synergy and also pricing better pricing power. I haven't tried to evaluate the value of their real estate holdings. Am buying based on expected earnings/cash flow. CPC can churn out cash - lots of free cashflow. As long as they reinvest it intelligently I think it'll produce above average returns over the long haul. And if they want to stop buying up other lots and just pay a big dividend - I'm OK with that too. To a large degree they are capable of financing their own growth. I like the business. People have to park cars or find alternate transportation. I'd think demand is fairly inelastic here. Competition can't just spring up across the road, because in many cases there's no place to build a new parking lot/garage. And it doesn't do the competition much good to build several blocks down because location is key. As far as management - they seem to have done very well for the company up until the latest hiccup. Earnings and ROE are currently below from what we'd expect historically, and I'm using this opportunity to buy in. Part of my bet is that going forward performance will return more closely to that of the past. Shane

To: James Clarke who wrote (672)	12/11/1998 2:56:00 AM
From: Bob Martin	Read Replies (2) \| Respond to of 4691

Re: TLAB and Buffet Disclosure: I'm a Tellabs employee and long-term stockholder. I first read The Warren Buffett Way over 2.5 years ago, and was fascinated. It was my first exposure to WEB's ideas and methods, and I was hooked. Naturally, my first impulse was to examine TLAB, since it was my employer and largest holding. At the time, even though we had experienced a couple years of explosive growth, I concluded we were still undervalued, and kept my position. In hindsight, it was a good move (this summer's failed CIEN merger notwithstanding :-( ). Now, instead of commenting on how I feel about our current valuation, let me just say this. Using Buffett's methods at least gives me a way of judging what a fair value is (in my opinion) based on my own growth assumptions and discount rate. (see appendix of TWBW for details). It is easy enough to determine owner earnings (Net earnings, not including one-time gains and losses + Dep&Amort - Cap Expend.) and then calculate a fair present value, based on the growth and discount assumptions. Now I realize Buffett also has lots of other rules-of-thumb, but this particular method of calculating fair value I feel is very valuable. First find companies you like, with good management and a proven track record, and then figure out what you think it's worth. Again, I won't comment on any particulars since I'm an employee, and I don't want to violate any SEC or company policies. However, I will say this. Using WEB's methods as described in TWBW, and using that as a basis for constructing what I call my P/OE table (price to owner earnings), showing growth rates vs discount rates, I can say that the common rule-of-thumb of "PE = Growth rate" is pretty much worthless. In other words, a company doesn't have to be growing at 50% to justify a PE of 50 (I'm using 50 as an example, that's not TLABs current PE). I would definitely invite you to examine TLAB, check out the growth and prospects, run some numbers for yourself, and see what you think. And let us know what you come up with. Bob

To: James Clarke who wrote (672)	12/11/1998 10:14:00 AM
From: cfimx	Respond to of 4691

James, I respect your desire to keep the threads pure. But you are walking a fine line. It's true that tlab is not a buffet stock. But will you use the same vigilance when others claim this is a "buffet" stock, or that one is—when in fact they really aren't? We have a perfect example. Central Parking is no more a Buffet kind of company than Tlab is, but for quite different reasons. If CPC owned the only parking lot in Yosemite, yeah, you've got a Buffet company. But a consolidator that issues more and more stock to get bigger in a mundane, unexciting business is what he has affectionately reffered to as a "chain letter" business. Nothing against Central Parking ( it may be a value here,) but if tlab belongs on another thread, surely cpc belongs on the "value" thread.