Seeking Alpha

thibaud

 
View as an RSS Feed
View thibaud's Comments BY TICKER:
Latest  |  Highest rated
  • Your Portfolio Can Get Fat On Fast Food In Brazil [View article]
    I can't speak to the product or the market, but looking at the most important financial data - real returns on invested capital, or ROIC - it seems that Richard's case has merit.

    Relative to Arcos Dorados (and to ARCOs' global parent), Bobs in recent years has achieved a superior return on invested capital (ROIC), which is a much more useful measure of real performance than ROE.

    From 2008-2011, Bob's generated an average ROIC of 33%. The company's ROIC increased from 29% in 2010 to 38% in 2011.

    This appears to speak not only to the company's ability to demand margin increases but also to its track record of deploying capital efficiently.

    The data I have for Arcos are for 2009-11, which show ROIC declining slightly from 28% to 27%. For what it's worth, MCD's ROIC has been almost flat during this period at 25-27%; PZZA has declined sharply from 61% in 2009 to 47% in 2010 to 44% in 2011.

    So either 2011 was an anomaly for Bobs, or else the company is generating increasingly high real economic returns on the capital at its disposal - in sharp contrast to its peers, who are not generating increasingly higher returns on the capital they deploy.

    Whether they can maintain this growth in ROIC depends on many things, but clearly, Bobs is doing something right.
    Feb 13, 2013. 02:49 PM | Likes Like |Link to Comment
  • Core Laboratories: Double Digit Dividend Growth, Top Decile Returns [View article]
    Great company, nice piece. Thanks.
    Feb 12, 2013. 07:49 PM | Likes Like |Link to Comment
  • Is Warren Buffett A Closet Dividend Investor? [View article]
    Nope. Over 50% of See's revenue (and >90% of operating profit) is generated during the Christmas season.This is a holiday gift business, basically.

    http://bit.ly/12KaiY6
    Feb 12, 2013. 07:44 PM | Likes Like |Link to Comment
  • Is Warren Buffett A Closet Dividend Investor? [View article]
    I guess I don't see the great value of their chocolate product. It isn't premium, and it's not supported by a brand with mass market awareness. It's a low-end product of limited appeal, one whose demand is almost entirely seasonal.

    No way they'd be able to compete effectively with either Cadbury's or Hersheys on the low end or Ghirardelli or Lindt on the high end.

    If I'd been a family owner/scion, I too would have decamped for Napa Valley and told Berkshire where to send my dividend checks.
    Feb 12, 2013. 06:51 PM | Likes Like |Link to Comment
  • Coca-Cola: A Conservative Investor's Best Friend [View article]
    Nothing in particular, no bias either way, just wanted an assessment from Mexico as to how talented, shrewd, patient, careful with invested capital etc the management team is.

    Are they among the best in Mexico, or are they closer to the middle of the pack?
    Feb 12, 2013. 06:03 PM | Likes Like |Link to Comment
  • Coca-Cola: A Conservative Investor's Best Friend [View article]
    Jairo, what's the view of KOF management in Mexico?
    Feb 12, 2013. 05:53 PM | Likes Like |Link to Comment
  • Coca-Cola: A Conservative Investor's Best Friend [View article]
    That's what I thought when I bought AZN instead of NVO. Wrong call.

    Not too many certainties in today's economic environment, but one of them is that the world's population will get fatter, sicker, more prone to diabetes and therefore in need of insulin.

    I'll go with the 27% market share global leader (NVO) that's consistently put up returns on invested capital north of 50%. A phenomenal track record by any stretch, and cheap at $166/share.
    Feb 12, 2013. 05:52 PM | 1 Like Like |Link to Comment
  • Coca-Cola: A Conservative Investor's Best Friend [View article]
    KOF is a much better play than KO. Less regulatory risk, less market competition, better trend in ROIC, and a pure play on a couple of high growth emerging markets where obesity is rapidly increasing.

    Buy KOF and pair it with an insulin giant like NVO.
    Feb 12, 2013. 05:39 PM | 2 Likes Like |Link to Comment
  • Is Warren Buffett A Closet Dividend Investor? [View article]
    If Sees had been a public company, the returns would almost certainly have been lower due to the "institutional imperative" that Buffett rails against.

    Retail candy shops in the western US is not a great business; it's a safe, boring, small business that works only so long as you have

    1) a large population of middle-class Americans hooked on an incredibly high-sugar, bland, mass-market food product purchased mainly around Christmastime; and

    2) patient ownership that has no industry ambition or desire for greatness.

    A publicly traded company would have been under severe pressure to improve or expand the product line, to build a great brand that can compete nationally or globally, and generally to reinvest the capital into the business for superior growth.

    Instead, Buffett took >90% of the cash flow from operations and put it to work in other businesses. He knew this was/is a modest little money-maker catering to a small niche market of middle American holiday buyers and refused to waste a dollar on trying to make it otherwise. Such modesty if emulated by our corporate managers would likely do wonders for the rest of the US economy.
    Feb 12, 2013. 05:20 PM | 1 Like Like |Link to Comment
  • Is Warren Buffett A Closet Dividend Investor? [View article]
    Poor - nothing fancy, just a very fast, dirty estimate, as follows: I took Buffett's figure of $1.35B and subtracted 35% for corporate profits and then subtracted the $32m CAPEX. Then I took this figure, divided by the initial $25m investment and spread the gain over 35 years, as follows:

    (1,350*(1-0.35)) - 32 = 845.5m in retained earnings

    return over 35 years = earnings/investment raised to 1/n years, minus 1
    = (845.5/25)^(1/35)-1

    = 10.6% after tax.

    This is extremely unlikely. There is not a single industry where the average returns do not converge, over a 35-year period, toward the weighted average cost of capital, in other words, toward zero.

    For such conditions to persist across a large investable universe, there would have to be structural barriers to competition, regulatory protection, insider information and/or other anomalies that inhibit the normal actions of convergence toward the mean return on invested capital.

    Coca-Cola will not achieve these returns in the future, neither will Wells Fargo, or Apple, or Google or likely any other company you can name. Buffett's era was a freak in modern economic history, a golden period in which, for the better part of about 30 years, US firms benefited from
    - high and rising consumer incomes,
    - very little dispersion of management knowledge and expertise,
    - rapid population growth,
    - huge barriers to rivals domestic and foreign,
    - few threats to corporate control (compared to our own era), and
    - friendly government / regulatory environments.

    Those days are gone. It will be extremely difficult in our own era for investors in US equities to achieve 10% after tax returns consistently over 10+ years.
    Feb 12, 2013. 04:06 PM | Likes Like |Link to Comment
  • Is Warren Buffett A Closet Dividend Investor? [View article]
    His return on the 1972 investment in See's was 11% p.a.
    He achieved a return of about 10% on his other holdings that were initiated in that era.

    Can this be replicated by the ordinary investor? That depends on whether companies today can achieve and sustain the kind of durable competitive advantage - crucially, over the same multi-decade period - as companies did back in the 1970s and 1980s.

    This notion seems doubtful at best. There is FAR greater competition, far more volatility, today in nearly every major industry than there was in the golden era when Buffett began accumulating his 10% annual returns.

    All of Buffett's favorite industries are facing far more competition, from many more quarters, than they did during the 1970s and 1980s. Consider how brutal the last decade has been for one of Buffett's cash-cow industries, the newspaper business. Insurance and financial services are both far more volatile today than they were back in his AMEX days. Industry after industry has faced intensified competition due to either the spread of managerial expertise to many new entrants, or intensified technological change, or deregulation, or foreign entrants into the US market.

    Bottom line, Buffett was a careful and patient American investor in an era which saw huge inflows into equity investments at the same time that the number of safe and steady American equity investments shrank dramatically.

    Not likely to see that strategy work in this era.
    Feb 12, 2013. 03:08 PM | 1 Like Like |Link to Comment
  • Occidental Petroleum Announces 4th Quarter and 12 Months of 2012 Income [View article]
    Nearly all the increase in production was domestic, and almost half of that came from California.

    OXY has leases on 74% of the Monterey Shale. That basin has very heavy oil, true, and California's regulators have been until recently adamantly opposed to permits. But consider:

    1) Even assuming much lower recovery rates for Monterey than for Bakken, the former's 4:1 advantage in sheer size of reserves makes it at least as significant as Bakken.

    2) Gov. Brown is determined to increase revenues for California from an "all of the above" approach that includes increased oil production in the state. To that end, he sacked the department head responsible for O&G permitting and replaced her with one more amenable to the industry.

    Neither of these catalysts of future growth in revenues, cash flow and EV is reflected in OXY's price.

    OXY is a cheap call option on a rebound in California oil production, which the state desperately needs if it is to avoid a downward fiscal spiral. Long $OXY.
    Jan 31, 2013. 12:54 PM | Likes Like |Link to Comment
  • Herbalife: Loeb Vs. Ackman - Sharks Eating The Sharks [View article]
    Ackman's thesis is based on an allegation of illegal activity. He's saying that the stock will go to zero because the company's distribution model is an illegal "pyramid scheme."

    That would be strong stuff under any circumstances, but the timing is especially odd. The MLM model, whatever one thinks of it, has been around for decades. It was scrutinized and left standing by the FTC, with some fairly clear standards (70/20 rule etc) which have provided guidance for the sector ever since.

    If Ackman had given a very concise, specific presentation that focused on specific evidence of willful violation of these guidelines - to the company's material financial benefit and in a way that showed a sharp departure from previous practice - then his allegation would indeed be big news.

    But what he's provided doesn't seem to offer such "new news". Perhaps I'm wrong, but he's rehashing old stuff that doesn't surprise anyone and that won't trigger any FTC activity.

    Very weird. I come down on Loeb's side on this one.
    Jan 10, 2013. 02:34 PM | 5 Likes Like |Link to Comment
  • Guns Still Better Than Gold! [View article]
    Well, I bought $CHMT before earnings, they blew past their numbers, and I made 18%.

    I declined to sell $RGR before earnings, they blew past their numbers and raised the dividend, and ... I'm down 9%.

    What gives?
    Aug 2, 2012. 02:28 PM | Likes Like |Link to Comment
  • Guns Still Better Than Gold! [View article]
    Very strange, indeed. $RGR management even announced they'll pay out 40% of earnings in the next dividend ($0.37).

    Bizarre.
    Aug 2, 2012. 02:26 PM | Likes Like |Link to Comment
COMMENTS STATS
165 Comments
123 Likes