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

To: Paul Senior who wrote (981)	1/9/1999 7:37:00 AM
From: cfimx	Read Replies (2) \| Respond to of 4691

Paul, I appreciate you taking time to consider my response with a thoughtful post. Buffetology (the book) suffers in one respect because of its poor timing. (This has repercussions for the various gorilla books.) That is, these books usually appear at the "end," at least for a while, of their realistic utility, and not the start. We are all chomping at the bit to apply what we learned in Buffetology, but it ain't easy because by the time the authors got around to putting pencil to paper, practiced investors had already been bidding up the prices of the stocks the book champions. That's because Buffetology started in the 70's when Berkshire's letters started to be read by the moneyed crowd. This is the problem you have identified. No cheap buffet stocks. My solution has been to GO SMALL. That's the best place to look now because of all the inefficiencies we all know about in these stocks. I have found some small fry Buffets, but not many. One stock that I am watching now is Pulitzer Publishing. I have already told you that WEB still loves this business under the right circumstances. This was also a stock mentioned in Buffetology as one the Oracle has monitored. This is a good one to put on the Laboratory table for a number of reasons. One, a good business. Two, it is small, family owned, thinly traded, so us little fish have an advantage actually. Three, they are changing. The family is trying to position themselves a bit differently for the future. What they are doing is splitting the newspaper and broadcasting businesses. They are selling off the TV and radio stations to a "pure play" broadcaster, Hearst-Argyle (htv), and spinning the newspaper assets off to shareholders. I have looked at htv and it is an impressive company and this is the right thing for Pulitzer to do, split the assets. Pulitzer has also hired a new CEO from the old Cap Cities to run the papers. Cap Cities was renown for cost cutting and great management. I like this move. Another key point is that the newspaper business will have NO DEBT and $24 of cash on the books to start off with. They plan to go shopping for more newspaper properties. So this transaction will happen soon. Paul, I know you follow spin off situations so you know that some nutty stuff can happen. For example, people might not want the newspaper part of this thing and just sell it indiscriminately. Or, when current shareholders get the htv stock, they might not want that. So there may be some selling in that great company. The point is, a buffetoligist should be able to KNOW or FIGURE OUT pretty precisely what each of these things are worth to a long term OWNER. Depending on the answer to that, one could buy one, or both, or neither. But, as you can see, the buffetologist is in the game trying. We aren't all sitting on our hands. BTW, I encourage you to track down the Charlie Munger article on the Motley Fool site. Munger is reducing investing to simpler terms, much as Graham did in his later years. Munger proposes that an investor could do well by buying only THREE GREAT AMERICAN COMPANIES, and doing nothing else! He makes no mention of getting a FAT PITCH three inches above the navel. That brings me to another criticism I have of our little group of aspiring Buffetologists. We put more emphasis on PRICE than we do on the quality of the business, which is the OPPOSITE of what we SHOULD be doing. Buffet and Munger say its perfectly fine to purchase a great company, as long as you are certain it is indeed GREAT, and as long as you don't PAY TOO MUCH. Notice the last three words. Notice he doesn't say AS LONG AS YOU GET THE DEAL OF THE CENTURY. This is important because we need HIS APPROVAL, right? That's how we operate here.<G> To me, Buffet's statement means we don't have to wait for the 100 year storm to get the thing at half off. It means when we find a company we want to hold FOREVER, we are on safe ground BUYING IT for what it is worth, and not mistakenly thinking we have to STEAL it. (Our hero says as much). Buffet, knowing what he knows about valuation today, would have been on safe ground paying three times as much for See's as he ended up HAVING to pay. And he still would have had the BARGAIN OF THE CENTURY. An investor might be better off going to SAKS TODAY for some Hearst-Argyle, than to wait five years for Wall-Mart to FINALLY open a store in your town, so you could get some Coke or Gillette at what YOU THINK is half off. Thanks again for the thoughtful response.