Forum Archive Index - July 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Macdunk,
 
>
        
> I understand and agree with your strategy for buying  and
> holding the Warren Buffett way.     However what Is the strategy when 
>a share turns to custard, as can happen when a company steers In the
> wrong direction.
>

I think Hugh gave the answer.  Warren would be a big enough 
shareholder to get in at board level and kick some butt.    Of course the 
small shareholder doesn't have that luxury.

>
>Lets take RBD for Instance one of your dogs, you bought warrens way
>but what happened then with the exit strategy?.
>

Let's be clear on this.   I did not buy RBD Warren's way.   RBD doesn't
 have the profit growth record to justify being a Buffett buy.  Perhaps I 
convinced myself that the push into Australia and Starbucks were cash 
cows waiting to happen.  But this was my mistake, not reflective of any
flaw in Buffett's share selection strategy.  I took a punt on the Starbucks
and Pizza Hutt Australia taking off and history has shown my punt to be 
premature.    But I don't believe the strategy is dead, which is why I 
continue to hold RBD.

Also I would like to dispell the myth that it is embarrassing to have 
some of your investments 'go bad'.    If I look back over my 'hit rate' 
I would so day probably one in five of my investments do go bad.    
 But if these investment losses are more than wiped out by gains 
elsewhere, does it really matter?  And it may be that a share price 
going south is good, as I can buy more shares more cheaply.

Furthermore ' going bad' is a relative thing.  My so called 'dog' RBD
 is yielding some 10%.   I'd pick that any day over a good flagellation.
Why sell and stick the money in a bank amount where I would only 
earn half the income at best?

I don't run a stop loss system.  I will quit a share if it no longer posseses
 the characteristics that seduced me to buy it in the first place.   But 
because I am careful with the original selection, this doesn't happen 
very often.  The only example I can think of is Air New Zealand.   I bought 
it for the dividend yield, the dividend was cancelled so I sold the share.
But Air New Zealand is not the sort of share that Warren would ever 
buy now!  And now, like Warren, I too have learned my lesson on buying 
into airlines!

SNOOPY





--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"Dogs have big tongues, so you can bet they don't 
bite them by accident"


----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/