This is a note taken at the 9th Value Investor’s Conference in Omaha on the day before the Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) shareholder meeting. Stacey Muirhead Capital was started in 1994. The firm employs a global value strategy. They own 10 to 20 securities. They invest in long-term holdings, arbitrage and workout situations, high yield and distressed positions and cash. They think value investing can be separated in two catergories:
1. Traditional Graham & Dodd
2. Buffett-Munger (the firm invests in this category)
What are high quality business?
1. Does it possess outstanding business economics?
2. Does it have honest and capable management?
3. Can it be purchased at an attractive price?
Reckitt Benckiser (LON:RB, Financial): the firm likes this UK company. “RB brands are household favourites all over the world, with products that delight as they make life’s daily routine easier and better.” “Reckitt Benckiser Group Plc is manufacturer and marketer of branded products in household, health and personal care, selling a range through over 60 operating companies into nearly 200 countries. The Company analyses its revenue based on health and personal care, fabric care, surface care, home care, dishwashing and other, together with pharmaceuticals and food. Its geographical segments include: Europe, North America and Australia, Developing Markets and RB Pharmaceuticals. Health & Personal Care products include Dettol, Veet, Strepsils, Durex, Mucinex, Clearasil, Nurofen, Gaviscon and Scholl. Fabric Care products include Vanish, Resolve/Spray ‘n Wash, Woolite and Calgon. Surface Care products include Lysol and Harpic. Home Care products include Air Wick, Mortein, d-Con, Cherry Blossom and Nugget. On February 4, 2011, it acquired a 50.1% interest in Manon Trading Company Limited (Manon). On April 11, 2011, the Company acquired Paras Pharmaceuticals Limited” (Google Finance).
Why is this a high-quality company?
1. High return of equity
2. Strong balance sheet
3. Attractive operating and net profit margins
4. Significant brand reorganization
5. Good dividend yield
6. Strong track record since RB merger
7. Revenue growth from $3 to 9.5 billion from 1999 to 2011, 10% growth
8. Net income 20% CAGR
9. Fabric treatment, surface clears, dishwashing, condoms, antiseptic liquids are all No. 1 world-wide brands,
Does it have honest and capable management?
1. Think and act like owners
2. Required management share ownership
3. Tangible performance targets
4. Strong board of directors. Graham Mackay – senior independent director
Can it be purchased at attractive price?
1. Purchased shares in March 2011 at 30.92 pounds
2. P/E – 12.5 after adjustments
3. Dividend yield 3.7%
4. Substantial non-core assets – Food & Pharma
5. Currently 35.6 pounds a share
Risks:
1. Raw material cost increases?
2. Retailer consolidation?
3. Private label?
4. Margin expansion? Nestle has higher margins in developed countries than in developing countries.
5. Global scalability?
6. General competition in RB pharma business?
1. Traditional Graham & Dodd
2. Buffett-Munger (the firm invests in this category)
What are high quality business?
1. Does it possess outstanding business economics?
2. Does it have honest and capable management?
3. Can it be purchased at an attractive price?
Reckitt Benckiser (LON:RB, Financial): the firm likes this UK company. “RB brands are household favourites all over the world, with products that delight as they make life’s daily routine easier and better.” “Reckitt Benckiser Group Plc is manufacturer and marketer of branded products in household, health and personal care, selling a range through over 60 operating companies into nearly 200 countries. The Company analyses its revenue based on health and personal care, fabric care, surface care, home care, dishwashing and other, together with pharmaceuticals and food. Its geographical segments include: Europe, North America and Australia, Developing Markets and RB Pharmaceuticals. Health & Personal Care products include Dettol, Veet, Strepsils, Durex, Mucinex, Clearasil, Nurofen, Gaviscon and Scholl. Fabric Care products include Vanish, Resolve/Spray ‘n Wash, Woolite and Calgon. Surface Care products include Lysol and Harpic. Home Care products include Air Wick, Mortein, d-Con, Cherry Blossom and Nugget. On February 4, 2011, it acquired a 50.1% interest in Manon Trading Company Limited (Manon). On April 11, 2011, the Company acquired Paras Pharmaceuticals Limited” (Google Finance).
Why is this a high-quality company?
1. High return of equity
2. Strong balance sheet
3. Attractive operating and net profit margins
4. Significant brand reorganization
5. Good dividend yield
6. Strong track record since RB merger
7. Revenue growth from $3 to 9.5 billion from 1999 to 2011, 10% growth
8. Net income 20% CAGR
9. Fabric treatment, surface clears, dishwashing, condoms, antiseptic liquids are all No. 1 world-wide brands,
Does it have honest and capable management?
1. Think and act like owners
2. Required management share ownership
3. Tangible performance targets
4. Strong board of directors. Graham Mackay – senior independent director
Can it be purchased at attractive price?
1. Purchased shares in March 2011 at 30.92 pounds
2. P/E – 12.5 after adjustments
3. Dividend yield 3.7%
4. Substantial non-core assets – Food & Pharma
5. Currently 35.6 pounds a share
Risks:
1. Raw material cost increases?
2. Retailer consolidation?
3. Private label?
4. Margin expansion? Nestle has higher margins in developed countries than in developing countries.
5. Global scalability?
6. General competition in RB pharma business?
