If Warren Buffett lived in NZ, what shares on the NZX would he buy?

[ENP]

Basically,

Which companies have a durable competitive advantage and are growing every year? When I actually think about it, I can only identify 2 companies. Perhaps only 1 company on the NZX.

I won't tell you as I'm interested to see if other peoples ideas of that kind of business are the same as my ideas.

[shasta]

Basically,

Which companies have a durable competitive advantage and are growing every year? When I actually think about it, I can only identify 2 companies. Perhaps only 1 company on the NZX.

I won't tell you as I'm interested to see if other peoples ideas of that kind of business are the same as my ideas.

On the NZX, the sort of companies he would like may include:

AIA, RYM, & at a pinch FBU?

None of these offer the sort of "margin of safety" he would want, ie buying a $1's worth of assets for 50c

[POSSUM THE CAT]

In MY opinion there are no shares on the NZX that would meet his criteria

[winner69]

With $50b he could buy the lot and get a good divie each year .... could be better than Coke

Talking of Coke I reckon they have changed the Zero formula in the last week or so ... Zero is awful now ... might need to go back to Pepsi

[CJ]

The ones that would meet his monop0ly criteria would be Vector and Auckland airport.

[percy]

I am inclined to agree with Possum the cat.Winner 69,just keep adding a measure of Bourbon until such time the taste improves.However Buffett did buy Mrs.B furniture store.She fell out with Buffett and opened across the road,so Buffett had to buy her out again.Only moat was Mrs.B reputation.So my list includes;
AIA New Zealands gateway airport with large land bank.
,EBO,reputation.Has the ability to follow the patient in medical supply.Systems and logistics.
POT,New Zealand's gateway Port.Correctly placed for export,and has rail link to Auckland's inland port.Will be NZ's hub port.
RYM,reputation,ageing population.
SKT.Has the programs people will pay to watch.The sports NZders want to watch.Has been able to add to customers spend.
PGC.Out of favour finnancial organisation at a huge discount.Bank shares thrown in for nothing.
What I look at is if you had a lot of money could you knock these companies off their perch.? The harder it would be, the more I think Buffett would like in
particular AIA and POT.

[ENP]

But Auckland Airport doesn't show any consistency in their earnings and a continuing uptrend in their business getting better each year, neither does Fletcher Building.

[CJ]

POT,New Zealand's gateway Port.Correctly placed for export,and has rail link to Auckland's inland port.Will be NZ's hub port.I dont think POT is such the monopoly AIA is given that Ports of Auckland is also a significant player. It will be interesting to see what the new council does to POA as it has the competing interests of running a competitive port and openning up the waterfront. My faith in the council has me thinking that you are probably right to back POT, but this is not necessarily the case.

SKT I agree with but the interesting thing will be how new technology effects this. If we do get fibre to the door, there is the potential for a competitor to come in. SKT will always have the advantage though while it has deep pockets to buy the main sports events.

RYM I also agree, not because of its monopoly (it doesn't) but because it is a very well run organisiation in its market.

[percy]

POT.Has all the exports at their back door,which Auckland does not have.With inland port has imports covered.But my main reason of thinking is in future huge ships will make one port of call.It will either be Melbourne or POT which will be NZ's hub.If it came to the crunch I think huge ships will go to POT.Auckland will still be a significant port but not the hub of NZ. should you get time read POT annual report.I read a mate's copy,then brought some shares.

[POSSUM THE CAT]

Percy Log ships are already running aground at Tauranga So it would need a huge amount of dredging

[percy]

Percy Log ships are already running aground at Tauranga So it would need a huge amount of dredging

Correct,but other than Marsden Point [part owned by POT] most other ports need huge amounts of dredging.i know otago,lyttelton and Auckland do.
I suppose Buffett would buy the dredging company.?!

[shasta]

But Auckland Airport doesn't show any consistency in their earnings and a continuing uptrend in their business getting better each year, neither does Fletcher Building.

Auckland Airport's earnings are leveraged to passenger numbers, so it will vary, but it has other revenue streams, & is the gateway into NZ internationally, no where else for other airlines to go, other cities airports only go to Australia/Pacific Islands directly.

The tourists who spend the most & have the greater numbers come from asia, thus will all go thru AIA to get here!

FBU, used to be a more cyclical business fully leveraged to residential building activity & whilst it still largely is, FBU has diversified a bit with Lamenix & now Crane Group, & have such a large order book, they have enough commercial work to ride them thru any downturn, & the Chch earthquake will provide FBU with more work than they can handle.

CJ - sumed up it well, RYM is very well run - a key aspect of Buffett's criteria!

PTC is also right, WB wouldnt be interested in anything on the NZX, due to there comparative small size, WB only makes big bets these days

[winner69]

Warren says the US house market is to recover strongly this year .... that'll help FBU

[POSSUM THE CAT]

Percy Why do you think POT owns a shareholding in North Port At Marsden Point?

[percy]

Percy Why do you think POT owns a shareholding in North Port At Marsden Point?

Most probably for same reasons you think.

[voltage]

so far AIA, RYM and FBU on list, what are the standouts on the ASX.

[ENP]

ASX has to be Woolworths, Coca Cola Amatil for starters.

AIA and FBU fit his criteria that they are sort of like a monopoly company in NZ, but their returns on equity and increase in earning per share each year are not good. RYM I identified a while back of being a good company, as well at SKT. But I think the capital expenditure SKT has to spend each year to maintain their systems doesn't put them into the durable competitive advantage, since they have to keep spending heaps to keep the business going.

[voltage]

interesting it is hard to find companies that have grown their dividends every year over the long term

[ENP]

interesting it is hard to find companies that have grown their dividends every year over the long term

Thought it would have been one of the most basic things to look for in a company. If you don't expect the dividends in 5 or 10 years time to be higher than this years, then why would you buy it?

[Snoopy]

Which companies have a durable competitive advantage and are growing every year? When I actually think about it, I can only identify 2 companies. Perhaps only 1 company on the NZX.


SKC. Legislated monopoly. Price depressed by smoking bans. Ozzie investments coming right. Cheap relative to Australasian peers. New CEO focussed on eps growth.

SNOOPY

[shasta]

interesting it is hard to find companies that have grown their dividends every year over the long term

Not really, the big ASX companies have plenty who have achieved this, have a look at UGL for instance

[thishastowork]

interesting it is hard to find companies that have grown their dividends every year over the long term

RYM has been consistently increasing its dividend in line with its profit increases. In my opinion they will continue to do so in the future

[ENP]

What about the two banks, Westpac and ANZ?

How do you figure out if a bank has a competitive advantage?

[Snoopy]

What about the two banks, Westpac and ANZ?

How do you figure out if a bank has a competitive advantage?

http://www.theaustralian.com.au/business/our-banks-beat-buffett/story-e6frg8zx-1111113759482

SNOOPY

discl: hold WPC and ANZ

[winner69]

This guy seems rather disappointed in Warrens reaction to one of senior guys doing quite well from a bit inside info

Say it ain’t so, Warren

Mark Carnegie

Published 2:21 PM, 3 Apr 2011

--------------------------------------------------------------------------------



An open letter from Mark Carnegie to his hero:

Dear Mr Buffett,

We have never met, but as a person who has worshipped you and your partner Charlie Munger for all of my business career I ask you to be strong and take a stand for what you know is right in the matter of David Sokol and his share trading. Do it before it is too late and you blow your reputation and everyone remembers you as the guys who took the easy way out when it was your turn to put up or shut up.

Last week the company where you are CEO accepted the resignation of David Sokol who was widely tipped to take over from you at Berkshire Hathaway.

The resignation was abrupt and a press release and subsequent interview on CNBC he said it was in order to spend more time with his family and on investing his family’s money.

Simultaneously there have been disclosures about his share trading in Lubrizol.

Lubrizol is a company that you at Berkshire Hathaway have agreed to take over, and he bought shares when he was orchestrating the deal to do so on your behalf.

Sokol states that the two events disclosure of the trading and his resignation are unrelated and you, in a statement to the media, say he did nothing unlawful.

However the SEC has now decided to investigate whether this is the case and time will tell.

The facts, legality and consequences are what they are in the United States but the situation would be vastly different in Australia.

A very senior partner in one of the most well regarded law firms in Australia has told me if someone here did the same sort of ‘front-running’ as Mr Sokol he would have breached section 1043A of the Corporations Act; prohibited conduct by person in possession of inside information.

This would arise by applying the definition laid out in that section of “inside information”, which says that the general test is whether ‘if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of [the shares].

Let’s think about that. Do you think that if there was widely available information that David Sokol was pitching the idea of a purchase of Lubrizol to you it would have had a material effect on the price of Lubrizol shares? I think my kids would know the answer to that.

Mr Buffett, here in Australia such a breach of the Corporations Act would have been punishable by a significant fine and many years in jail. For example, a person was sentenced to a minimum of three years in jail for front running just last December.

You by contrast are going to tell us what Mr Sokol did was acceptable and thank him for all his hard work?

The fact that Mr Sokol’s purchase of approximately $10 million of shares in Lubrizol and his profit of $3 million when Berkshire subsequently decided to bid for the company was legal in the US and would be illegal here is largely beside the point.

To me, the issue is a moral referendum on you and Charlie Munger. You have to say what he did was wrong and that if he hadn’t resigned you would have fired him.

After well over fifty years in business it is time for you two to finally put up or shut up. One of your key lieutenants has been discovered to be Darth Vader and has used the dark side of the force to make in a few days more money than most people make in their lives.

You cannot stand by him and stay on your pedestal in my pantheon of business heroes. You will no longer be the living proof that people that are good and true in this world can also succeed.

Make a stand here and ‘tar and feather’ David Sokol or fall from my, and I suspect many others’, grace. From where I sit, to not do so reveals you as the same as craven hypocrites you have highlighted as presiding over so many other companies in so many of your annual reports and shareholder meetings.

What he did stinks; what you say at the famous shareholders meeting at the end of the month is what is really going to matter.

Mr Munger, who is my special hero, always said that you and he wanted to be exemplars for society. Well the example you are currently setting is that behind all the rhetoric you are just the same as everyone else.

Alice Schroeder who wrote your biography ‘Snowball’ said it well when she said in a recent piece for Bloomberg: “How could Warren Buffett excuse David Sokol’s trading in Lubrizol Corps stock while Sokol was pitching the company to Berksire Hathaway as an acquisition candidate?” She says “it would be inexcusable for the chief executive of Berkshire Hathaway to front-run a potential acquisition this way. Why then couldn’t the CEO of Berkshire admit it is inexcusable for one of his most senior managers to do so?” To many your actions are inexplicable.

If it where anyone else the only explanation people would think of would be that Mr Sokol had the pictures – and the only question they would be asking was what where they of? Here that is not the case because ‘you are you’ but it makes the whole affair stranger. As Schroeder recounts, and all of us who worship you guys can say from memory, you have always told your employees: “Lose money and I will forgive you, but lose even a shred of reputation and I will be ruthless.”

Mr Buffett if you are not yet convinced to make a stand please do a couple of your famous thought experiments.

If you were looking down from heaven as Bill Gates was the chairman Berkshire and David Sokol chief and the same facts applied what would you have hoped your great friend Bill would do?

Second what would you have done if one of Mr Sokol’s assistant’s traded at exactly the same times but in 1/100th of the size and Mr Sokol asked you what he should do about it?

I think what you will find when you answer these questions is that even if Mr Sokol gets free virtually anyone doing something similar would be deservedly hung from the yard-arm.

Mr Buffett please do what is right don’t do what is easy; Say “It ain’t right and it ain’t so”.




Mark Carnegie, the head of the Lazard Australian Private Equity business, is an investor in Business Spectator. The opinions expressed in this article are the personal views of the author.


http://www.businessspectator.com.au/bs.nsf/Article/Warren-Buffett-David-Sokol-Berkshire-Hathaway-Lubr-pd20110403-FK6XP?OpenDocument&src=rot

[upside_umop]

I think he would also be interested in NZX and MHI*
MHI has a great model and continue to roll out more stores. People don't trust buying a ring off the internet and I don't think they ever will....
NZX is a punt on the NZ economy. Our capital markets will develop more over time and NZX looks to be diversified enough to provide stability. It's unlikely someone else will enter the market and if they were, it would be from a takeover of NZX.
I think AIA makes too much money for their realisable assets - to think the Canadians/Dubai were going to pay $5b is beyond me. If it were to get too much more expensive to land there, I think it would be viable to build an airport at sea!
*He probably wouldn't buy either as they are far too small!

[winner69]

I think he would also be interested in NZX

Do you mean the whole NZX ... warts and all .... and even then prob have a bit of change

[Lizard]

People don't trust buying a ring off the internet and I don't think they ever will....


And I would never trust buying a ring off MHI! If you really want to impress a girl, go for something really kiwi and unusual in the jewellery stakes...
http://www.nzrubyrock.com/ - very rare, NZ goodletite... quite hard-wearing compared to the likes of opal too.
http://www.lisatamati.co.nz/shop/ - buy something unique hand-crafted by a NZ endurance champ.
http://bluepearls.co.nz/jewellery-gallery/ - buy the absolute, to die for, blue eyris pearls.
http://www.pearlparadise.com/ - or (if you must go global), just slash the budget and go for the ultimate look-good pearls at a fraction of historical south sea or akoya prices (just watch for the import taxes though if you go expensive!).

[upside_umop]

NZX the stock. Not the whole index..although its performance is somewhat derived from the capital markets. This is a long term govt objective and will almost certainly improve.

[upside_umop]

And I would never trust buying a ring off MHI! If you really want to impress a girl, go for something really kiwi and unusual in the jewellery stakes...
http://www.nzrubyrock.com/ - very rare, NZ goodletite... quite hard-wearing compared to the likes of opal too.
http://www.lisatamati.co.nz/shop/ - buy something unique hand-crafted by a NZ endurance champ.
http://bluepearls.co.nz/jewellery-gallery/ - buy the absolute, to die for, blue eyris pearls.
http://www.pearlparadise.com/ - or (if you must go global), just slash the budget and go for the ultimate look-good pearls at a fraction of historical south sea or akoya prices (just watch for the import taxes though if you go expensive!).

It's a little hard to take you're girlfriend into 'an internet store' and put a ring on her finger though isn't it Liz?!

The point I'm getting at, this is unlikely to change and MHI has a great model which seems to be able to be replicated well. They have a long term goal of 1,000 stores worldwide and if they are as successful as the current ones...they will do very well!

[winner69]

Lizard - from a man's pointof view I think blue pearls are really beautiful .... been to a place in Akaroa that has plenty and Berrys in Wellington have some as well .... willing but my wife doesn't seem to like them that much .... lucky me eh

[Lizard]

.... willing but my wife doesn't seem to like them that much ....

She's mad...

[winner69]

Many talented jewllwer designers in NZ

If you don't want anything with stones in them and with a bit of NZ flavour without the paua I have managed to please the girls in my family with stuff from Kiri Schumacher

http://kirischumacher.co.nz/earrings.html

The fuschia earrings are really beautiful

[Lizard]

If you don't want anything with stones in them and with a bit of NZ flavour without the paua I have managed to please the girls in my family with stuff from Kiri Schumacher

http://kirischumacher.co.nz/earrings.html

The fuschia earrings are really beautiful

Thanks winner! Beautiful stuff to my magpie eyes!

Apologies to Warren for hogging his thread with such frivolities - I'm sure he would be appalled at wasting good investment funds on such things!!!:scared:

[winner69]

Thanks winner! Beautiful stuff to my magpie eyes!

Apologies to Warren for hogging his thread with such frivolities - I'm sure he would be appalled at wasting good investment funds on such things!!!:scared:

Jewellery and Warren go together ... he owns Borsheims ... so no need for MHI
http://shop.borsheims.com/Borsheims/Default.aspx

Shareholder meeting has an open day at Borsheims .... best part of the trip to Omaha the women say

[upside_umop]

NZX the stock. Not the whole index..although its performance is somewhat derived from the capital markets. This is a long term govt objective and will almost certainly improve.

Looks like it has already.

http://www.stuff.co.nz/business/market-data/5033336/NZX-shares-soar-after-SOE-news