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Buffett buys BRANDS Replies |
rffrydr
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 Posted: Wed Feb 08, 2012 5:30 pm Post subject: |
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| Quote: | Coca-Cola: it’s the real thing
People are willing to pay more for Coca-Cola – the drink and the stock. It is pointless to argue that it makes no sense to pay up for brand-name soda. People do, and that’s what matters. But share prices are something else. Coke shares trade at 17 times forward earnings, a hefty premium to the market. The demanding valuation may be why shares only ticked 1 per cent or so higher when Coke reported solid fourth-quarter earnings on Tuesday.
Coke’s valuation cannot be justified by looking at its growth profile in isolation. It targets a low to mid single-digit expansion. But the company has characteristics that make the share price look reasonable. While growth is not rapid, it is impressively consistent and the company’s profits are spread evenly around the world. In 2011, Europe, Latin America and North America each contributed about a quarter of profits, with developing markets in Asia and Africa making up the rest. Volumes and profits grew in every region – even Europe – and the company raised prices in most regions. Combine this with a universal brand and you have a company that looks more enduring than most nations.
Is there another consumer staples company with a comparable profile? PepsiCo’s profits are much more concentrated in the Americas. The biggest of the global beer companies, AB InBev and SABMiller, do a bit better at emulating Coke’s global reach but they lack single global brands and their European and North American operations are struggling mightily to grow. The closest comparison is probably McDonald’s, but even that company has more of its profits concentrated in Europe and North America than Coke does.
Coke shares may be unlikely to make anyone rich from here but they are even more unlikely to make anyone poor. Shell out and drink up. |
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rffrydr
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rffrydr
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| Posted: Mon Nov 14, 2011 7:53 pm Post subject: |
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Buffett and IBM
| Quote: | Does Warren Buffett buy a stock because it’s a good investment, or is it a good investment because Warren Buffett buys it? Generations of Mr Buffett’s admirers have been wary of tech stocks because The Oracle was. But now Berkshire Hathaway has bought more than 5 per cent of IBM.
This turnabout makes sense at several levels. IBM has the financial and operational characteristics that Mr Buffett favours. IBM generates oceans of free cash flow ($80bn between 2005 and 2010) and allocates it in shareholder-friendly ways ($82bn in buy-backs and dividends over the same period).
IBM has achieved this, and grown net income by nearly 90 per cent, while hardly expanding its asset base at all. The move into services – now well over half of revenues and the chief legacy of departing boss Sam Palmisano – makes IBM relatively stable. As new business technologies emerge, IBM’s global network of consultants simply help their customers install and use them. And IBM’s cash generation means it also has a war chest for acquiring cutting-edge technologies.
Berkshire Hathaway, with $35bn in gross cash on its balance sheet and more rolling in all the time from Mr Buffett’s portfolio companies, needs to put money in big, liquid stocks. IBM, with its $220bn in market value, fits the bill. But IBM’s sheer size will make the next leg of growth a bigger challenge than the last one. The competition is going to be tougher as well. Hewlett-Packard, for example, cannot execute poorly forever. Because of IBM’s success and the accelerating commoditisation of hardware, every big tech company is rushing into services and software. IBM is the most richly valued of the big IT companies, at 14 times forward earnings. By paying up, Mr Buffett got a stake in the best-run and most stable large tech company. But it has a very large target painted on its back, as well |
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rffrydr
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| Posted: Sat Oct 08, 2011 8:43 am Post subject: |
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| Quote: | | .....(ignoring, of course, any of the cash flows generated by its businesses, as well as the $3 billion expected to come through this year from General Electric GE as that company pays back the lifeline that CEO Warren Buffett lent it during the height of the financial crisis) |
That's a whole lot of ignorance.
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HenryTo
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| Posted: Mon Sep 26, 2011 12:04 pm Post subject: |
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Morningstar on the *potential* Berkshire shares purchase:
| Quote: | | In yet another surprise move this year, Berkshire Hathaway BRK.A BRK.B announced Monday that its board of directors has authorized a share-repurchase program that will be used to buy back Class A and B shares at prices no higher than a 10% premium to the firm's current book value per share (which stood at $98,716 per Class A share or $66 per Class B share at the end of the second quarter). While Berkshire was vague about how much cash it would spend buying back stock, the insurer did note that repurchases would not be made if they reduced the firm's consolidated cash balance below $20 billion. The company closed out the second quarter with around $48 billion in cash on its books. Having invested $5 billion in Bank of America BAC during August, and using another $9 billion this month to complete its purchase of Lubrizol, Berkshire is probably sitting on something closer to $35 billion right now (ignoring, of course, any of the cash flows generated by its businesses, as well as the $3 billion expected to come through this year from General Electric GE as that company pays back the lifeline that CEO Warren Buffett lent it during the height of the financial crisis). This would leave at least $15 billion for Berkshire to use buying back stock in the near term. Given the constraints that Buffett has placed on the price he would be willing to pay for Berkshire's shares, we do n't expect the full amount to be deployed, as the Class A shares are already trading at more than 7% above book value. We will, however, continue to monitor the situation and make adjustments to our fair value estimate as they are warranted. |
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rffrydr
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| Posted: Mon Sep 26, 2011 9:30 am Post subject: |
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....And now he's buying himself.
This is one nagging craw in my bullish stance right now. It does seem right that Buffett gets a final comeuppance...but I think he just has too much $$$$.
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rffrydr
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| Posted: Mon Apr 25, 2011 6:55 am Post subject: |
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The man who buys brands is a brand in himself. (in the spirit of Lincoln):
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”
None better--'cept maybe the creator of the jesus phone 
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rffrydr
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| Posted: Sun Mar 27, 2011 5:49 am Post subject: |
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Branding nature...the nature of a brand:
| Quote: | | The final phase of label design emerged in 1935, when the brand name became the star of the label, often spelled out in bold three-dimensional-looking block letters in a style that presaged Pop Art, McClelland said. |
http://www.latimes.com/news/local/la-me-then-20110327,0,4188244.story
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rffrydr
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| Posted: Mon Mar 21, 2011 7:50 am Post subject: |
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Buffett keeping it simple....on the road to asia 
http://www.bloomberg.com/news/2011-03-21/buffett-says-less-sure-about-outlook-for-apple-than-coca-cola.html
“Even though Apple may have the most wonderful future in the world, I’m not capable of bringing any drink to that particular party and evaluating that future,” Buffett said. “I simply look at businesses where I think I have some understanding of what they might look like in five or 10 years.”
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rffrydr
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rffrydr
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| Posted: Sat Jul 24, 2010 7:15 pm Post subject: |
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"The Last Roll." Kodak Kodachrome bows out in style:
http://www.npr.org/blogs/pictureshow/2010/07/23/128728114/kodachrome
This is my kind of buy but, thankfully, have never bit. Still a believer that film has a place front and center. And Hollywood was still a monopoly.... but that camera they used to scan Afghanistan had a GPS print for every pixel! And Avatar almost makes Hollywood pointless.
Like to see a biz school paper on Kodak and "terminal value"....and how it all played out.
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rffrydr
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| Posted: Tue Apr 13, 2010 8:42 am Post subject: |
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And yet the success stories continue. It is truly remarkable the success Starbux enjoys in china considering it's a nation that not only doesn't like coffee but abhors it. But then I spend alot of time here and I don't drink the stuff either. Two real tea choices but go I do.
http://online.wsj.com/article/SB10001424052702304604204575181490891231672.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsTop
They had initially written off the effort and sold a small franchise over there--which was run terribly. Bought them back...got kicked out of the forbidden city but this is one case where the chinese have embraced the foreign devil. The internet is the future....that's the dead zone: eBay, Google, Yahoo, Facebook, all succumbing to their "antipodes."
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HenryTo
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| Posted: Tue Jan 12, 2010 4:18 pm Post subject: |
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| Great post. Spreads/risks are finally being repriced according to fundamentals and countries are now being differentiated. Rebranding Nigeria may have worked during the 2005 to 2006 period - and when oil was at triple digits - but this effort is just a waste of time. |
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rffrydr
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rffrydr
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| Posted: Tue Nov 24, 2009 11:46 am Post subject: |
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Looking at hedged play (a la MT's dollar or Crude) an am considering selling this golden halo effect against the competition. Specifically, selling Bulington Northern and buying Union Pacific. 
Most of the qualities Buffett is looking at are available in Union Pacific with Burlington leaning more to the china import play with its double wide tracks to CA vs. Union Pacific lock on the ever growing american southwest.
I think the housing bust will put a cap on that for awhile but see the china trade plateauing (with a general slowdown in the commodity transport) and tech and labor upgrades put a shine on the industry in the context of high (not peak) energy prices.
Still too much trade and economic optimism in these prices so looking to leg in on the short side (alway dangerous).
This "deal" of Buffett's is a deal with the devil. It's a legacy deal and it takes Berkeshire "out of his hands." It's meant to payoff for the next 100 years and all can look back at WB's monument. --Of, course we know about those
Here, though, we see utilities are not without risks of their own:
http://m.ft.com/cms/s/0/788d77c6-d3b2-11de-8caf-00144feabdc0.html?catid=127&SID=cfb27e4983b0ae58fff43e0d617da058
BT should be a tech issue though--Warren, rightly, stays away from tech.
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