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quote: Originally posted by bushbasher
However, even in this example if you had bought 10 years ago at $15 you would still have made a compound return approaching 12% p.a. based on a share price of $45 today. Everything depends on the time period during which you hold.
By using technical measures you could have sold for $70 to $50 [u]8 years ago</u>. Even if you hurried the selling process and got 10% or 15% less than you should have, you've had 8 years to make it back. If you are exceptionally enarmored with the stock, you could buy back in at any time the technicals corroborated (Coke may finally be doing so now - an irony with Buffett announcing his departure from the board).
quote: Originally posted by bushbasher
Now that he is so big Warren Buffet doesn't have the luxury (as most of us do) of being able to get into and out of stocks in a short time horizon.
Berkshire Hathaway owns 200m shares in Coke, about 8.45% of the company, currently worth roughly US$9b. The total value of Coke is in excess of $100b. The value of all securities listed on the NYSE back in March was US$43.6 TRILLION (This isn't even counting the Nasdaq and other North American markets). Coke represents less than 0.25% and Buffett's stake around about 0.02%. It's not a credible argument that he would face difficulties selling this stake. In the New Zealand context selling 100% of TEL would be a big ask. In the USA its less than a blip.
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Buffett made a lot of money on Coca Cola but then gave a very significant proportion of his winnings back to the market. In less than 5 years, his 1998 holding worth $17.7 billion fell to $7.4 billion as KO went from a high of $88.94 to a low of $37.01.
Did Buffett not see the overvaluation in '98?
The market certainly did!!!
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Member
quote: Originally posted by Halebop
quote: Originally posted by bushbasher
However, even in this example if you had bought 10 years ago at $15 you would still have made a compound return approaching 12% p.a. based on a share price of $45 today. Everything depends on the time period during which you hold.
By using technical measures you could have sold for $70 to $50 [u]8 years ago</u>. Even if you hurried the selling process and got 10% or 15% less than you should have, you've had 8 years to make it back. If you are exceptionally enarmored with the stock, you could buy back in at any time the technicals corroborated (Coke may finally be doing so now - an irony with Buffett announcing his departure from the board).
I don't disagree with that at all. I've never held Coke but if I had I doubt I would have lasted 8 years of poor performance. My point is if you can pick all the market turns correctly with technical analysis all credit to you. I don't have sufficient faith in my own ability to act on supposed key technical market signals consistently enough for it to be a viable method for me.
Incidentally, did TA indicate that FPH should have been sold when it got sold aggressively down to $3.30 in December? Anybody who did would have missed out on a 33% gain since then.
quote:[i]
quote: Originally posted by bushbasher
Now that he is so big Warren Buffet doesn't have the luxury (as most of us do) of being able to get into and out of stocks in a short time horizon.
Berkshire Hathaway owns 200m shares in Coke, about 8.45% of the company, currently worth roughly US$9b. The total value of Coke is in excess of $100b. The value of all securities listed on the NYSE back in March was US$43.6 TRILLION (This isn't even counting the Nasdaq and other North American markets). Coke represents less than 0.25% and Buffett's stake around about 0.02%. It's not a credible argument that he would face difficulties selling this stake. In the New Zealand context selling 100% of TEL would be a big ask. In the USA its less than a blip.
True, its not a big number in terms of the US stock market. However, $9 BN is a pretty big chunk of stock to place even here. The largest IPO in US corporate history (AT&T Wireless in 2000) only (!) raised just over $10 BN. It would certainly not be impossible for Buffet to place the stock but I suspect he has held (perhaps misplaced) faith in the management to turn the situation around there, till now.
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quote: Originally posted by bushbasher
...My point is if you can pick all the market turns correctly with technical analysis all credit to you. I don't have sufficient faith in my own ability to act on supposed key technical market signals consistently enough for it to be a viable method for me.
This is the favoured high ground of FA's arguing against TA. There is no system that can pick ALL trends correctly. If you can show me the FA system that is ALWAYS right and ALWAYS outperforms I'll happily dump any use of TA. For me TA is another tool in the tool box. Unfortunately, all my tools have their foibles.
quote: Originally posted by bushbasher
Incidentally, did TA indicate that FPH should have been sold when it got sold aggressively down to $3.30 in December? Anybody who did would have missed out on a 33% gain since then.
Depending on what signals you were watching for and your investing time frames TA might have told you to exit FPH. But those same signals would have then told you to re-enter as well. Selling, even if it were a false positive signal, does not preclude buying again.
No matter your time frame TA told you to exit Coke and has kept confirming it for almost 8 years, despite numerous shorter term uptrends. We currently have a weakish and tentative indicator of another short term uptrend. Maybe in 5 years time FAs will be able to blinker logic and exclaim "see, he was right to hold through 10 years of negative returns!"?
quote: Originally posted by bushbasher
It would certainly not be impossible for Buffet to place the stock
That's all I was sying as well. The size of his holding did not preclude him from selling.
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Bushbasher, you ask "did TA indicate that FPH should have been sold when it got sold aggressively down to $3.30 in December?"
No, it didn't. Take a look at this 5 year FPH chart. You can see that the longterm trendline was unbroken by the December low you mention. In addition, a longterm moving average was also unbroken. (SMA, Dark blue, period chosen to intersect low of March 2004 - nicely confirmed April 2005) A stop loss set to intersect the low of Decenber 2002 (Red) remains unbroken, but over the years it has gradually diverged from the price action and is now a bit on the loose side. I have plotted a series of successively tighter trailing stops to compensate for the acceleration of the uptrend. You can see that all remain unbroken.
Similarly, the longterm trendline has fallen a bit behind price action over the last 6 months and could be replaced by new, steeper trendlines if you wanted to. All are unbroken. Really conservative longterm holders of FPH wouldn't bother with all this updating nonsense - they would still be using the original longterm trendline, moving average and trailing stop. Since price action is so far above all of these indicators, they would only need to check the chart every few weeks or so.
Personally, I run a more active system than that shown here and have in fact been flicked out of FPH 3 times over the 4 year period covered by the chart. You select a system and indicators that are appropriate to your chosen level of market activity.
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quote: Originally posted by bushbasher
Phaedrus, thanks for the graph. Back to your original question on this thread I would not be selling FPH using FA or TA. Seems very clear with FPH that its been in a fairly long term uninterrupted uptrend. Long may it continue 
At the end of the day its seems to me your chosen investment strategy really depends on how hands-on you want to be with your portfolio.
You are quite wrong the FPH sp has had a few interuptions, if you look at the chart. From july to feb 2003 the sp went nowhere. Its one thing to say its on a long uptrend after the event, and another to close your eyes to reality half way there. If in doubt get out is my motto. Once a share is in profit i lower my stop loss and time line but must still admit i would have been out in sept. macdunk
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quote: Originally posted by Halebop
A discount cash flow valuation of $4.00 is very easy to hit if you use Buffett's interpretation of the risk free rate of return. In NZ the 10 Year bond rate was 5.79% the last time I looked. DCF allows for many permuations but a simple $4.00 permutation for FPH would be...
Are those bond rates quoted pre-tax? That may also have a significant effect on the permutation.
Zaphod
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I guess if you wanted to you could change the bond discount rate to reflect 33% tax (the value of fully franked New Zealand company earnings). If the bond rate wasn't asking for trouble, the implied 3.88% discount rate surely would be?
I'll stick with my double digit discount rates in either case.
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If you are an FPH holder and want a heart-warming experience to help cope with this miserable winter weather, then spend a little time studying their Annual Report - and you'll be wondering why you ever bother chasing some of the other rubbish that's about in the market.
The positives are too many to detail, but I particularly noted:
* Operating margin of 35.9%
* Pre-tax return of 53% on equity (this despite shareholders equity being $203m against $267m of total assets)
* Intangibles such as goodwill, patents and trademarks, carried at a meagre $3m in the books - the true value of the patents, intellectual property rights, etc., in this world-class business must be enormous!
* Independent valuation of land & buildings is $108m - against $42m book value.
* 65% of revenue is earned in US$. I haven't tried to analyse the full hedging position but the recent decline in the NZD will have given considerable relief.
* And the sales and revenue outlook is one of significant growth, not only across the core product groups but also backed up by development of new specialised products in the treatment of patients.
Its the sort of success story that one doesn't see all that often these days, particularly in the manufacturing field. I'm sure that the pessimists among you (and I usually tend to err that way, myself) could find some negatives, and I realise that the TA people will dwell on the recent (slight) price weakness, but for those of you who are casting around for something that won't "do a TEL" on you, this might be one for you to consider.
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